A bank statement loan is a mortgage for self-employed borrowers that uses your bank deposits, instead of your tax returns, to calculate income. If write-offs make your taxable income look low, it's often the simplest way to qualify for the home or investment property your business can actually afford.
Why Self-Employed Borrowers Struggle With Conventional Loans
Conventional lenders qualify self-employed borrowers on the net income from their tax returns, after every deduction. A business owner running $350,000 a year through the company might show $70,000 of taxable income after legitimate write-offs. A conventional loan sizes the mortgage to the $70,000. A bank statement loan looks at the deposits instead.
How Bank Statement Income Is Calculated
- Choose 12 or 24 months of business or personal statements.
- Total the eligible deposits. Transfers between your own accounts, refunds, loan proceeds, and unusual one-time deposits are taken out.
- Apply the expense factor to business deposits.
- Multiply by your ownership share if you own less than 100% of the business.
- Divide by the number of months to get qualifying monthly income.
Example: $620,000 of eligible business deposits over 24 months is $25,833 a month. With a 50% expense factor, qualifying income is about $12,917 a month, compared with roughly $5,400 a month on a $65,000 tax return.
Bank Statement Loan Requirements
Guidelines vary by lender. Here's what today's Non-QM lenders typically publish, and the best terms available for strong files:
| Guideline | Typical | Strongest files, at some lenders |
|---|---|---|
| Credit score | 620–660 | From about 600, with lower LTV |
| Max LTV, primary purchase | 80–85% | Up to 90% with 720+ credit |
| Max LTV, cash-out | 70–75% | Up to 80% |
| Statements | 12 or 24 months | Some programs as few as 3–6 months at lower LTV |
| Self-employment history | 2 years | 1 year with prior experience in the same field |
| Debt-to-income | Up to 50% | Up to 55% for strong files |
| Loan size | Up to $2–3 million | Up to $4 million or more |
| Property | Primary, second home, investment | Same |
The strongest terms usually require several things at once: higher credit, solid reserves, a clean housing history, and a moderate loan amount. Treat the right-hand column as the ceiling, not the starting point.
Expense Factors Explained
The expense factor is the share of business deposits a lender assumes went to business costs.
| Account or method | How lenders usually treat it |
|---|---|
| Business statements, standard | 50% expense factor (half of deposits counted as income) |
| Business statements with a CPA, EA, or tax preparer letter | Your documented expense ratio, sometimes as low as 10–20% |
| Business statements with a third-party P&L | Income from the P&L, checked against deposits |
| Lender table by business type | A set factor for your industry, often 15–50% for service businesses and higher for product businesses |
| Personal statements | Often 100% of eligible deposits, sometimes with business statements to show the business is separate |
If your business has low overhead, such as consulting, real estate sales, or professional services, documenting your real expense ratio can raise your qualifying income dramatically.
Personal vs. Business Statements
If your business deposits flow into a business account and you pay yourself into a personal account, personal statements can be the cleaner option, because many lenders count all eligible deposits without an expense factor. If you run everything through one account, business statements with an expense factor are usually required. I'll look at both before we choose.
12 Months or 24 Months?
| 12 months | 24 months | |
|---|---|---|
| Best for | Income that's grown recently | Steady income, or a slow recent year |
| Pricing | Sometimes slightly higher | Sometimes slightly better |
| Paperwork | Fewer statements | More statements |
What Underwriters Look For
- Consistency: seasonal swings are fine if the pattern makes sense for your business.
- Trend: declining deposits may lead the lender to use the lower, more recent period.
- NSFs and overdrafts: a few are usually fine; frequent ones need an explanation.
- Large deposits: anything unusual will need a source.
- Business verification: a business license, CPA letter, or state filing, plus a short business narrative at many lenders.
How to Prepare Your Statements
- Keep business revenue in one account if you can.
- Avoid moving money between your own accounts in the months before you apply, or keep a clear record of each transfer.
- Ask your CPA or tax preparer whether they can document an expense ratio below 50%.
- Download complete statements, every page, for every month.
- Keep two months of statements for your down payment and reserves accounts too.
Bank Statement Loan Alternatives
- P&L loans, if your CPA can prepare a profit and loss statement
- 1099 loans, if you're paid as a contractor
- Asset depletion loans, if you have large savings
- DSCR loans, if you're buying a rental and don't want to use personal income at all
In California? See self-employed mortgage options in California.
Bank Statement Loan FAQ
What credit score do I need for a bank statement loan?
Many lenders start around 620, and some go to about 600 with a larger down payment. The best rates and highest LTVs usually need 700–720 or higher.
How much do I need to put down?
Commonly 10–20% on a primary home, depending on credit and loan size, and more for investment properties and cash-out refinances.
Can I get a bank statement loan with one year of self-employment?
Some lenders allow it, usually if you worked in the same field before going out on your own. Two years is still the most common requirement.
Are bank statement loan rates higher?
Usually somewhat higher than conventional loans, because they're Non-QM. Pricing depends on credit, down payment, loan size, and documentation type.
Do bank statement loans require tax returns?
No. You may sign an IRS form 4506-C at some lenders, but your tax returns aren't used to calculate income.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.