Bank Statement Loans

Bank statement loans are designed for self-employed borrowers, business owners, and entrepreneurs who can't document their income through traditional W-2s and pay stubs.

Instead of tax returns, lenders use 12 or 24 months of personal or business bank statements to calculate your income. This benefits borrowers who have significant business write-offs that reduce their taxable income.

Bank statement loans are a type of non-QM (non-qualified mortgage) loan, meaning they don't conform to standard qualified mortgage rules but still provide legitimate financing for creditworthy borrowers.

Income Calculation: Lenders review your bank deposits over 12-24 months and calculate an average monthly income. They typically use 50-75% of deposits depending on your business type and expenses.

Personal vs Business Statements: You can use personal bank statements, business bank statements, or a combination. Business statements may allow for higher income calculation.

Expense Ratios: Lenders apply an expense ratio to account for your business costs. Service businesses might use 50% expenses, while others may use different percentages.

Multiple Bank Accounts: If you have multiple accounts, you can typically use all of them to show your full income picture.

Consistent Deposits: Lenders look for consistent, regular deposits that demonstrate stable income over time.

Self-Employed Professionals: Doctors, lawyers, consultants, and other professionals who show reduced income on tax returns due to business expenses.

Business Owners: Entrepreneurs and small business owners who reinvest profits back into their business rather than showing high personal income.

1099 Contractors: Independent contractors who receive 1099s and have significant business deductions.

Real Estate Investors: Those with rental property income who show losses on paper due to depreciation and expenses.

Seasonal Workers: Borrowers with income that varies throughout the year but shows consistent deposits.

Recently Self-Employed: Those who recently became self-employed but have strong bank statements showing consistent income.

Time in Business: Typically 2 years self-employed or in business, though some lenders accept 1 year with strong compensating factors.

Credit Score: Minimum 600-680 depending on the lender, with better rates for 700+ scores.

Down Payment: Usually 10-20% minimum, though some programs allow as low as 10% with strong credit.

Cash Reserves: Expect to show 6-12 months of reserves, as lenders want to see financial stability.

Bank Statements: 12 or 24 months of consecutive statements. Some lenders allow 12 months for established businesses.

Business License: Many lenders require proof of business registration or license.

CPA Letter: Some lenders require a CPA letter verifying your self-employment and business stability.

Interest Rates: Typically 0.5-1.5% higher than conventional loans, though highly qualified borrowers may get near-conventional rates.

Down Payment: Larger down payments (20%+) can help secure better rates and terms.

Fees: Origination fees may be slightly higher than conventional loans, typically 1-2% of the loan amount.

Property Type: Primary residences get the best rates. Investment properties and second homes have higher rates.

Despite higher rates, bank statement loans are often the best option for self-employed borrowers who show reduced taxable income. The ability to use actual cash flow rather than tax returns makes homeownership possible for many entrepreneurs.