Loan Programs
Self-Employed
Bank Statement Loans
A mortgage solution designed for self-employed borrowers, freelancers, and business owners who qualify using bank deposits instead of tax returns. Verify your income the way you actually earn it.
What Is a Bank Statement Loan?
A bank statement loan is a non-QM (non-qualified mortgage) product that allows self-employed borrowers to document their income using personal or business bank account deposits rather than W-2s or tax returns. Lenders review 12 to 24 months of bank statements to calculate an average monthly income, bypassing the traditional documentation requirements that often penalize business owners with large write-offs.
Who This Loan Is For: Self-employed individuals, sole proprietors, LLC owners, S-corp shareholders, freelancers, gig workers, commissioned sales professionals, and real estate investors whose tax returns understate their true cash flow due to business deductions.
How Bank Statement Income Is Calculated
Lenders use one of two methods depending on whether you submit personal or business bank statements:
| Statement Type | Income Calculation Method | Typical Expense Factor |
|---|---|---|
| Personal Bank Statements | 100% of average monthly deposits | None (personal account) |
| Business Bank Statements | Deposits x expense factor | 50% (net = 50% of deposits) |
| Business (higher margin) | Deposits x expense factor | 25-40% (net = 60-75% of deposits) |
| P&L Statement Option | CPA-prepared profit & loss | Lender-specific review |
Example Calculation: A business owner deposits $20,000/month average over 24 months. With a 50% expense factor, qualifying monthly income = $10,000. At a 43% DTI, this supports up to $4,300/month in total debt payments, including the new mortgage.
Bank Statement Loan Requirements
| Requirement | Typical Standard | Notes |
|---|---|---|
| Credit Score | 660 minimum | 700+ for best rates; 720+ for jumbo amounts |
| Down Payment | 10-20% | 10% down available with 700+ credit; 20% lowers rate |
| Bank Statements | 12 or 24 months | 24 months preferred; 12 months at higher rate |
| Self-Employment History | 2 years minimum | Verified via CPA letter or business license |
| Debt-to-Income Ratio | Up to 50% | 43-50% depending on lender and loan size |
| Loan Amount | Up to $3M+ | Many lenders go to $3M; some up to $5M |
| Property Types | Primary, second home, investment | 1-4 units, condos, PUDs accepted |
| Reserves | 3-12 months PITI | Higher reserves reduce rate and ease approval |
| Cash-Out Refinance | Allowed | Up to 75-80% LTV on cash-out |
Personal vs. Business Bank Statements
Choosing between personal and business statements depends on where your income flows and how your business is structured. Most lenders accept either, but the documentation and expense factor differ:
| Factor | Personal Statements | Business Statements |
|---|---|---|
| Income Used | 100% of deposits | 50-75% of deposits (after expense factor) |
| Best For | Sole proprietors, freelancers | LLC, S-corp, C-corp owners |
| Documentation | Personal bank statements only | Business statements + CPA letter |
| Commingling Risk | Must separate personal from business | Clean business accounts preferred |
| Higher Income Qualifier | Often higher net if sole prop | Better when large deposits offset by exp. factor |
Advantages
- No tax returns or W-2s required for income verification
- Qualifies borrowers whose write-offs reduce taxable income
- Available for primary homes, second homes, and investment properties
- Loan amounts up to $3M or more with the right lender
- 12-month option available for recently self-employed
- Cash-out refinance allowed up to 80% LTV
- Interest-only options available with some lenders
Disadvantages
- Higher interest rates than conventional loans (typically 0.5-2% above market)
- Larger down payment required (10-20% minimum)
- Not a government-backed or conforming loan — no FHA/VA/Fannie backing
- Business expense factor reduces qualifying income
- Fewer lender options compared to conventional programs
- Requires 2 years of documented self-employment history
- Lender overlays vary widely — terms differ by lender
Bank Statement vs. Other Loan Types
| Feature | Bank Statement | Conventional | FHA | DSCR |
|---|---|---|---|---|
| Income Documentation | Bank deposits | W-2 / tax returns | W-2 / tax returns | Property cash flow |
| Minimum Credit | 660 | 620 | 580 | 640-680 |
| Min. Down Payment | 10% | 3-5% | 3.5% | 20-25% |
| Mortgage Insurance | None (LTV-dependent) | PMI if <20% down | Required always | None typically |
| Loan Limit | $3M+ | $806,500 conforming | $541,287 standard | $3M+ |
| Best For | Self-employed | W-2 employees | First-time buyers | Real estate investors |
| Rate Premium | 0.5-2% above conv. | Market baseline | Near market | 0.5-1.5% above conv. |
How to Qualify for a Bank Statement Loan
- Confirm self-employment status: Gather your CPA letter or business license showing at least 2 years of self-employment or business ownership. This is required by virtually all bank statement lenders.
- Collect 12-24 months of statements: Pull complete statements (all pages, all months) for the personal or business account where income deposits flow. Avoid large one-time or non-recurring deposits that will be excluded by the lender.
- Calculate your qualifying income: Average the monthly deposits, apply the expense factor (50% for most business accounts, 100% for personal), and verify the resulting figure supports your target loan at your DTI ratio.
- Check your credit and reserves: Review your credit report for any issues. Confirm you have sufficient reserves — most lenders require 3-12 months of PITI (principal, interest, taxes, insurance) in liquid assets after closing.
- Choose the right lender: Bank statement programs vary significantly by lender. Compare expense factors, rate premiums, down payment requirements, and maximum loan amounts. Work with a broker who specializes in non-QM products for the best terms.
Bank Statement Loan FAQs
Can I use business bank statements if I am not the sole owner?
Yes, but ownership percentage matters. If you own less than 25% of the business, most lenders will not accept business statements for income qualification. At 25% or more ownership, you can typically use business deposits — but expect the lender to request a CPA letter confirming your ownership share and self-employment status.
What if my deposits are inconsistent month to month?
Lenders average your deposits over the full 12 or 24 months rather than using a single month. Inconsistent deposits are common for seasonal businesses or commission earners. Providing 24 months of statements rather than 12 gives a more stable average and often results in better loan terms.
Do bank statement loans have prepayment penalties?
Some non-QM bank statement loans include soft prepayment penalties, typically a 1-3 year penalty period ranging from 1-3% of the loan balance. Not all lenders charge this, and it can sometimes be negotiated or waived with a slightly higher interest rate. Always review the prepayment clause in your loan disclosure documents carefully.
Can I refinance out of a bank statement loan into a conventional loan later?
Yes. Many self-employed borrowers use a bank statement loan to purchase a home and then refinance into a conventional loan once they have 2 years of tax returns that better reflect their income — or when their business structure changes. This is a common and effective strategy to lower your long-term rate.
Free Tool
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