Bank statement loans, explained
A bank statement loan is a non-QM mortgage that qualifies you using your bank deposits instead of your tax returns. It exists for one reason: plenty of self-employed borrowers earn well but show low net income after write-offs. This is the loan that reads the deposits, not the deductions.
How they work
Instead of Schedule C net income, the lender averages 12 or 24 months of deposits and applies an expense factor (often 50%, sometimes lower with a CPA letter) to estimate your real income. That figure drives your approval.
Who qualifies
- Self-employed 2+ years (some lenders accept 1 year).
- Credit typically 660+; best pricing 700+.
- 10–20% down depending on credit and reserves.
- Consistent deposits that match a believable business story.
Rates & costs
Because they’re non-QM, expect rates roughly 0.75–1.5% above conventional (sample: ~7.25% vs ~6.41% this morning) and slightly higher reserve requirements. The premium buys you approval on income a conventional lender simply won’t count. Compare against every alternative on the loan types page.
Pros & cons
- Pro: qualify on real cash flow, no tax-return drama.
- Pro: keep your write-offs and still buy.
- Con: higher rate and down payment.
- Con: smaller lender pool — neutral comparison matters.
How to apply
- 1. Pull 12–24 months of business statements.
- 2. Estimate qualifying income with the expense factor above.
- 3. Size your purchase with the affordability calculator.
- 4. Compare bank-statement lenders, then connect when ready.
FAQ
24 months can smooth out seasonal businesses and sometimes improves pricing; 12 months is easier to assemble and fine for steady deposits. Many lenders offer both.
Business statements are standard; personal-account programs exist but usually apply a higher expense factor. A CPA letter can lower the factor and raise your qualifying income.
Often yes — once your tax returns show enough income, you can refinance out of the non-QM rate into a conventional loan.