BANK STATEMENT
Rate and Term Refinance

A bank statement rate and term refinance loan refers to a mortgage refinance loan that is offered based on the borrower’s bank statements, rather than their traditional credit score and income verification process. This type of loan is often called a “stated income” or “low-doc” loan.

In a bank statement rate and term refinance loan, the lender evaluates the borrower’s bank statements over a specified period (usually the last 6-12 months) to determine their ability to repay the loan. The lender looks at the borrower’s deposits, withdrawals, and other transactions to assess their cash flow and financial stability.

The term “rate” in this context refers to the interest rate charged on the refinance loan. A bank statement rate loan may offer a slightly higher or lower interest rate than a traditional refinance loan, depending on the borrower’s financial situation as demonstrated by their bank statements.

The term “term” refers to the length of the refinance loan. A bank statement rate and term refinance loan typically offers a longer term compared to a traditional refinance loan, such as a 30-year fixed-rate mortgage. This allows borrowers to repay the loan over a longer period, which can result in lower monthly payments.

Bank statement rate and term refinance loans are generally used by self-employed individuals, investors, or those with unconventional income sources who may not meet the strict credit and income requirements of traditional refinance loans. However, these loans may come with higher fees and rates compared to traditional refinance loans, so borrowers should carefully consider their options before choosing this path.