Bank Statement Loans by Shining Star Funding
Program Context and Target Borrower Profile
Bank Statement Loans by Shining Star Funding (SSF) offer Alternative Documentation (Alt Doc) , specifically including Bank Statement Loans, as specialty financing solutions.
A. Target Borrower and Purpose
The Bank Statement program is explicitly designed for self-employed individuals, independent contractors, freelancers, and small business owners. This product provides a solution when conventional financing is not feasible because the borrower’s tax deductions and business write-offs result in artificially low taxable income.
The core purpose of the BSL is to qualify borrowers based on their actual cash flow demonstrated through bank activity.
B. Eligibility Requirements
- Self-Employment Status: To be eligible for the Bank Statement product, at least one borrower must derive their primary income from a self-employed activity.
- Business Requirement: The program is designed for borrowers with an active, U.S. based business that is generating stable revenue.
- Ineligible Borrowers: Borrowers who only receive income from passive or portfolio sources (e.g., managing their own rental properties, distributions from limited partnerships, day trading, or property flipping) are ineligible for the standard BSL program.
- Ownership: The self-employed borrower must have an ownership interest in the business of 25% or greater to utilize business income. For personal bank statements, some programs allow minimum ownership as low as 20%.
Documentation and Income Calculation Methodology
The BSL relies heavily on cash flow analysis over a defined historical period, eliminating the need for traditional IRS documents.
A. Required Documentation
- Statements: Lenders require 12 or 24 months of complete and consecutive bank statements. These statements must generally be dated within 60 days of the note date.
- Business History: Borrowers generally must have been self-employed in the same business for a minimum of two years.
- Tax Documents: Tax transcripts (4506-C) are NOT required on Bank Statement Loans. If tax returns or transcripts are provided in the loan file, the loan will be rendered ineligible for the BSL product.
- Business Narrative: A signed written business narrative is required, detailing the business’s operations, primary products/services, customer base, and number of full-time employees.
B. Income Calculation
The income calculated is the lower of the eligible deposit average or the monthly income disclosed on the initial signed loan application (1003).
1. Business Bank Statements: An expense ratio is applied to the gross eligible deposits:
– Fixed Expense Ratio: A fixed ratio of 50% is standard for most business types.
– Third-Party P&L: Net income may be based on a P&L statement prepared by a qualified third party (CPA, EA, or PTIN licensed tax preparer).
– Third-Party Expense Ratio: A CPA or tax preparer can provide a letter specifying the business’s actual expense ratio, which must be a minimum of 20%.
2. Personal Bank Statements: There is typically no expense factor applied if separate accounts are maintained. Only transfers received directly from the borrower’s business account(s) are considered eligible deposits. The most recent two months of business bank statements must be provided to validate that the borrower maintains separate accounts.
Loan Parameters and Underwriting Standards
As a Non-QM product, SSF’s Bank Statement Loans offer expanded flexibility on LTV and DTI compared to conventional mortgages, but still require strong credit and reserves.
| Criterion | Requirement / Allowance |
| Eligible Properties | Primary Residence, Second Home, and Investment Properties. |
| Loan Purpose | Purchase, Rate-and-Term Refinance, and Cash-Out Refinance. Cash-Out Refinance transactions are subject to lower LTV thresholds. |
| Minimum FICO | Minimum credit scores generally start at 660. However, a 700 or greater is considered a good credit score for approval. |
| Maximum DTI | The maximum Debt-to-Income ratio allowed is typically 50%. Certain programs (Sharp Expanded) may allow DTI up to 55% with a minimum FICO of 700. |
| Max LTV (Purchase) | Maximum LTV can reach 90% for purchase of a Primary Residence in certain program tiers (Min FICO 700). |
| Reserves | Alternative Documentation loans often require minimum reserves, with the requirement increasing based on the loan amount (e.g., 6 months PITIA for loans up to $1.5MM in some programs). |
| Derogatory Credit | Loans are subject to seasoning requirements (e.g., 2 years minimum seasoning for bankruptcy/foreclosure with ?80% LTV, or 4 years seasoning for >80% LTV in Our Advantage Program). |
FAQ's
BSLs can be used for a Purchase, Rate/Term Refinance, or a Cash-Out Refinance. However, Cash-Out LTVs are typically lower than purchase LTVs.
The maximum LTV can reach 90% for a primary residence purchase in certain program tiers.
Borrowers who have been self-employed less than two years (but at least one year) may be eligible if they document two years of previous experience in the same line of work and provide an ** additional six months of reserves**.
While the absolute minimum score for any borrower must be at least 620, borrowers should maintain a good credit score (700 and up) to be approved for a Bank Statement Loan and qualify for the best terms.
Borrowers must generally verify at least two years of self-employment history in the same business.
Lenders use eligible deposits and apply a fixed expense ratio to account for business costs. A Fixed Income Expense Ratio of 50% is the standard deduction for most business types.
The self-employed borrower must generally have an ownership interest of 25% or greater in the business entity.
No. Tax returns and tax transcripts are explicitly NOT required for the BSL program. If tax returns or transcripts are provided in the loan file, the loan is rendered ineligible for the Bank Statement product.
Lenders generally require 12 or 24 months of complete and consecutive bank statements from the same account to evaluate the borrower’s average monthly income and financial stability.
The program is specifically designed for self-employed individuals, independent contractors, freelancers, and small business owners. It is intended for those with an active U.S. based business that is generating stable revenue.
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For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.
Interactive calculators are self-help tools. Results received from this calculator are designed for comparative and illustrative purposes only, and accuracy is not guaranteed. Shining Star Funding is not responsible for any errors, omissions, or misrepresentations. This calculator does not have the ability to pre-qualify you for any loan program or promotion. Qualification for loan programs may require additional information such as credit scores and cash reserves which is not gathered in this calculator. Information such as interest rates and pricing are subject to change at any time and without notice. Additional fees such as HOA dues are not included in calculations. All information such as interest rates, taxes, insurance, PMI payments, etc. are estimates and should be used for comparison only. Shining Star Funding does not guarantee any of the information obtained by this calculator.
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