Utah small business owners may qualify for mortgages with bank statement loans

A Utah mortgage strategist says self-employed borrowers with strong cash flow but low taxable income can still qualify for home loans by using bank statement underwriting. The approach helped close a jumbo loan for an out-of-state buyer purchasing in Heber City, showing how non-QM lending can open financing options that traditional banks may miss.

Why it matters: - Self-employed borrowers can have strong businesses, solid assets and ample down payments, yet still fail traditional mortgage underwriting because taxable income looks too low. - Bank statement mortgages can give lenders a different way to measure repayment ability when tax returns understate a business owner’s earnings. - The approach may be especially useful for Utah small business owners shopping for jumbo loans.

What happened: - Steve Saxton, a self-employed loan strategist with Christian Roberts Mortgage, recently closed a jumbo bank statement loan for an out-of-state buyer purchasing in Heber City, Utah. - Multiple lenders had told the borrower the file would be difficult or possibly impossible to qualify. - The borrower owned 50% of an Arizona-based business and was buying a home priced between $2.5 million and $3 million. - The borrower and his wife were also building a custom home in Tuhaye valued at about $12 million and needed a place to live during construction.

The details: - The borrower had more than 20% available for a down payment. - Monthly business cash flow was strong, but tax returns did not show enough qualifying income for a traditional jumbo mortgage. - Saxton determined that K-1 income and taxable income were too low to qualify under standard jumbo guidelines. - The business was profitable, but depreciation, amortization, legitimate deductions and tax planning reduced reported income. - Saxton said, “The borrower did not have an earnings problem. He had a documentation problem.” - Saxton then evaluated the file as a 12-month business bank statement mortgage. - Twelve months of business bank statements were collected and eligible deposits were averaged. - Because the borrower owned 50% of the company, only 50% of the eligible deposits were counted toward his income. - A 50% business expense factor was applied under the loan program. - The calculation produced enough qualifying monthly income to approve the mortgage. - Bank statement mortgages, also called non-QM bank statement loans, rely on business deposits rather than tax-return income alone. - Not every deposit counts. Transfers, borrowed money and non-business deposits may be excluded. - The loan still required jumbo underwriting standards, including substantial post-closing reserves. - If a loan requires 12 months of reserves and the housing payment is $18,000 per month, the borrower may need about $216,000 in eligible assets left after closing. - Large bank statement loans may also require a second appraisal or an appraisal review. - Borrowers may need to verify prior mortgage or rental payment history. - Business ownership and time in business may need to be confirmed by a CPA, accountant or other acceptable third party. - The lender may also verify that the company is still open and operating. - Because the business was in Arizona and the property was in Utah, underwriting also had to assess how the borrower would keep operating after the move. - The lender’s underwriters ultimately approved and closed the transaction.

Between the lines: - The case shows why self-employed borrowers can be misread by traditional mortgage screens. - A low taxable income number does not always match a borrower’s real cash flow. - Access to non-QM products matters, but so does knowing how to document deposits, ownership and reserves correctly. - Saxton said access alone is not enough and that loan officers need to understand business ownership, deposits, expense factors and jumbo requirements.

What's next: - Saxton is positioning bank statement mortgages as a path for Utah borrowers with complex income. - More self-employed buyers may need to look beyond traditional retail banks if their tax returns understate earnings. - Mortgage programs, reserve rules and appraisal requirements can change by lender and borrower profile, so future borrowers will still need individualized underwriting review.

The bottom line: - For some business owners, the problem is not income. It is how that income is documented. More information is available at SteveSaxton.com.