Bank statement loan
A non-QM mortgage that qualifies borrowers on 12–24 months of bank deposits instead of tax returns. An expense factor (typically 40–60%) is applied to average monthly deposits to estimate qualifying income. Designed for self-employed borrowers whose tax-return net income is reduced by legitimate business deductions.
How it works in practice
The mechanics: you provide 12 or 24 months of statements, the lender averages the qualifying deposits, applies an expense factor to business bank statements, and treats the result as monthly income. Twenty-four-month programs smooth seasonal businesses; twelve-month programs favor a business that's growing right now. Personal-account programs typically credit deposits at or near 100% but expect the business's expenses to clearly live elsewhere.
Underwriters read the statements themselves, not just the totals. Non-sufficient-funds incidents, declining monthly deposits, large unexplained one-offs, and heavy transfers between your own accounts all draw letters of explanation — or exclusions from the average. Six months of clean statement hygiene before applying (separate accounts, consistent deposits, documented transfers) is often worth more than any negotiation with the lender afterward.
Expect 10–20% down, credit minimums around 620–660 with real pricing improvement above 700, and rates 0.75–2% over conventional. That spread is an illustrative editorial estimate, not a quoted rate — no regulator publishes a non-QM premium. Reserves of 6–12 months of the new payment are commonly required. The classic lifecycle: buy with the bank statement loan while write-offs suppress your returns, then refinance into conventional pricing once two cleaner tax years exist.
Common questions
Do I need to be self-employed for a bank statement loan?
Substantially, yes — programs are built for borrowers whose income is business-derived, and most want two years of self-employment (some accept one). A W-2 employee with normal payroll income wouldn't benefit anyway: their income is already fully documented.
Will lenders count cash deposits?
Traceable business revenue counts; unsourced cash is the weakest deposit type and many lenders exclude or heavily scrutinize it. If your business is legitimately cash-heavy, deposit consistently into the business account and keep records that connect deposits to revenue.
Related terms
- Non-QM loan — Any mortgage that doesn’t meet the CFPB’s Qualified Mortgage definition — usually because it uses alternative…
- P&L loan / P&L-only — A non-QM program that qualifies borrowers using a CPA-certified profit-and-loss statement instead of full tax…
- Asset depletion loan — A non-QM program that converts liquid assets into qualifying income using a formula: eligible assets ÷ loan te…
- DSCR loan — Debt-Service Coverage Ratio loan. A non-QM investment property loan that qualifies based on the property’s pro…
- ITIN loan — A mortgage program for borrowers with an Individual Taxpayer Identification Number instead of a Social Securit…
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Sources
Educational definition only — not financial, legal, or tax advice. Programs and limits change; verify current terms with a licensed professional.