How do you calculate income using my business and/or personal bank statements?
While you can use either personal or business bank statements to provide income verification, some banks may require both if applicable. Self-employed borrowers can provide 12 or 24 months worth of bank statements but 24 months is preferred for better interest rates and terms. If you deposit earnings directly into a personal bank account then the mortgage lender will typically use 50-60% of the deposits to determine your gross income. If you transfer money from a separate business account into a personal one, the lender will use all of the funds to calculate your gross income. From there, they will divide the annual income by 12 to determine the mortgage payment amount you can pay each month. Many lenders will use the 28/36 rule when determining your mortgage payments. This means that your mortgage payment should be no greater than 28% of your income and your total debt payments, any debt in addition to your mortgage payments, should be no greater than 36% of your income.