Bank Statement Loans
Qualify on 12 or 24 months of deposits instead of tax returns — for business owners whose write-offs shrink their taxable income.
Tanner & Zac Cook NMLS #2090424 / #2111496Cornerstone First Mortgage, LLC NMLS #1738554.89 · 45 reviews of Tanner Cook on Experience.comShort answer
A bank statement loan is a non-QM mortgage for self-employed borrowers that documents income with 12 or 24 months of personal or business bank statements instead of tax returns. The lender totals eligible deposits, removes transfers and other non-income deposits, applies an expense factor to business accounts (commonly 50%), and averages the result into monthly qualifying income.
Written by Tanner Cook, NMLS #2090424 · Updated
What is a bank statement loan?
A bank statement loan is a non-QM home loan that uses the deposits into your bank account, rather than the taxable income on your returns, to establish what you earn. It exists because the write-offs that lower a business owner’s tax bill also lower the income a conventional underwriter can count. It is still a documented loan: the lender verifies your deposits, assets and credit, and makes an ability-to-repay determination before approving it.
Built for business owners, sole proprietors, and 1099 earners whose tax returns understate real cash flow after write-offs.
You're a contractor, agency owner, or consultant who does everything a good business owner is supposed to do: you write off equipment, mileage, home office, health insurance, and every legitimate expense your CPA can find. It keeps your tax bill down — but it also means the adjusted gross income on your returns looks like a fraction of what actually lands in your account each month. When you apply for a conventional mortgage, the underwriter uses that shrunken number, and suddenly the bank says you can't afford a house you comfortably pay for in cash flow.
A bank statement loan solves that mismatch. Instead of tax returns and a 4506-C transcript, the lender looks at the deposits into your bank account over the last 12 or 24 months and uses those to establish your qualifying income. Your money is your proof. For a huge share of self-employed borrowers, that single change is the difference between a decline and an approval.
What does a bank statement loan require?
- What you provide:
- 12 or 24 months of consecutive personal or business bank statements (every page), plus proof the business exists, such as a business license or CPA letter.
- History needed:
- Commonly two years of self-employment; some investors accept less with compensating factors. Guidelines vary by investor.
The guideline parameters for this program are below. Guidelines subject to change without notice.
- Minimum FICO
- 640+
- Income documentation
- Average of 12 or 24 months of bank deposits (no tax returns, no 4506-C)
- Max LTV / loan amount
- Up to 90% to $1M · 85% to $2.5M · 80% to $5M
- Cash-out
- Available, including delayed financing
- Rate structure
- Fixed or adjustable rate; interest-only available on qualifying files
- Eligible borrowers
- U.S. citizens, permanent residents, work-visa non-permanent residents, LLC-vested
- Occupancy
- Primary residences, second homes and investment properties
- Eligible properties
- Single-family, townhome, condo, pre-construction, and non-warrantable condo
- Title / vesting
- Individual or LLC vesting permitted
How is income calculated on a bank statement loan?
Eligible deposits over 12 or 24 months, minus excluded deposits such as transfers and loan proceeds. Business accounts also get an expense factor (commonly 50%, sometimes lower with a CPA expense letter) and your ownership share. The total is averaged to a monthly figure.
Business vs. personal statements: how the expense factor works
The lender adds up your deposits over the statement period you choose — 12 or 24 months — and averages them to a monthly figure. But not every dollar that hits your account counts as income, and the way expenses are handled depends on which account you use.
If you qualify on BUSINESS bank statements, the underwriter cannot treat 100% of your deposits as personal income, because a business has costs. So they apply an expense factor — commonly around 50% — which means roughly half of your deposits are treated as business overhead and the other half as your qualifying income. Some investors will use a lower expense factor if your CPA provides a letter stating your actual expense ratio (for example, a service business with few costs might document 20–30%), which raises your qualifying income.
If you qualify on PERSONAL bank statements, there is generally a 0% expense factor — the deposits are treated as income you have already paid yourself — but the lender will scrutinize the source of those deposits and typically wants to see that the money originates from your business.
Why don’t all of your deposits count?
This is the part borrowers are surprised by, so it is worth being blunt: the number the lender uses will almost always be lower than the total you see deposited. Beyond the expense factor, underwriters strip out deposits that aren't recurring business income — transfers between your own accounts, loan proceeds, one-time asset sales, tax refunds, and large unexplained lump sums all get excluded so they don't inflate the picture.
The practical takeaway: keep your business income flowing through one clean account, avoid commingling personal transfers into that account, and be ready to explain any deposit larger than your typical monthly average. Borrowers who run tidy books qualify for more, because less of their money gets discounted.
Should you use 12 or 24 months of statements?
A 12-month program looks at your most recent year of deposits, which helps if your business has grown recently or had a slow stretch two years ago. A 24-month program averages a longer window, which can smooth out a strong recent year but also protect you if last year dipped. We look at both when we structure your file and use whichever presents your income most accurately and favorably.
What you bring to the table
Plan on providing consecutive bank statements (every page), evidence you have been self-employed — commonly two years, though some investors allow shorter with compensating factors — and something that documents your business exists, such as a business license, CPA letter, or operating agreement. Because this is a full ability-to-repay loan, the underwriter still verifies assets for down payment and reserves and pulls credit.
Which deposits are excluded from a bank statement loan?
Underwriters remove deposits that aren’t recurring income before they average what’s left. Guidelines vary by investor.
| Deposit type | How underwriters usually treat it |
|---|---|
| Transfers between your own accounts | Excluded. Moving money between accounts isn’t new income. |
| Loan proceeds, credit-line draws and credit-card cash advances | Excluded. Borrowed money isn’t income. |
| Refunds, reversals and chargebacks | Excluded. They return money rather than earn it. |
| Tax refunds | Excluded. Not business income. |
| Gifts and personal transfers from friends or family | Excluded. Not earned income. |
| One-time sales of assets, such as a vehicle or equipment | Usually excluded. Not recurring income. |
| Large deposits outside your normal pattern | Must be sourced and explained. Investors set the size that triggers review; unexplained deposits are excluded. |
What else do underwriters check on a bank statement loan?
How is debt-to-income (DTI) calculated on a bank statement loan?
Debt-to-income on a bank statement loan compares your total monthly obligations to the monthly qualifying income from the bank statement calculation. Obligations include the new housing payment (principal, interest, property taxes, homeowners insurance and any HOA dues) plus the minimum payments on credit cards, auto loans, student loans and other debts on your credit report.
That is the same structure Fannie Mae describes for conventional loans: total monthly obligations divided by the income used to qualify. On a bank statement loan, the investor sets the maximum ratio, and it can vary with your credit score, loan size and occupancy.
How many months of reserves does a bank statement loan require?
Reserves on a bank statement loan are the liquid funds you still have after closing, measured in months of the new housing payment. Checking and savings balances, stocks, bonds and mutual funds, and the vested balance of retirement accounts are the usual sources, though investors may count market and retirement accounts at less than face value.
How many months you need depends on the investor, the loan size and the occupancy. Guidelines vary by investor, and larger loans and investment properties typically need more.
How does your ownership share affect a bank statement loan?
If you qualify on business bank statements and own only part of the business, a bank statement loan usually counts the qualifying income in proportion to your ownership share. Investors also set a minimum share you must own to use business statements, and they verify it with documents such as a CPA letter, operating agreement or articles of incorporation. Guidelines vary by investor.
How do NSF and overdraft items affect a bank statement loan?
NSF (non-sufficient funds) and overdraft items are a warning sign on a bank statement loan, because they suggest cash flow is tighter than the deposits imply. Investors set how many they will accept in the statement period and usually ask for a letter of explanation, and a pattern of them can limit your options. Keeping a cushion in the account during the months you plan to use is the simplest fix.
Do 1099-K payment-app deposits count on a bank statement loan?
Usually, yes: deposits from card processors, payment apps and online marketplaces count on a bank statement loan when they are payments for your goods or services. Those platforms report such payments to the IRS on Form 1099-K. Personal transfers through the same apps, such as a friend repaying you, are not business income and are excluded, as are refunds, reversals and chargebacks.
Bank statement loan vs. conventional: which fits you?
The clearest way to see the value of a bank statement loan is to line it up against the conventional loan a self-employed borrower usually gets steered toward first.
| Feature | Bank Statement Loans | Conventional loan |
|---|---|---|
| Income proof | Bank Statement Loans12 or 24 months of bank deposits | Conventional loanTwo years of tax returns + 4506-C transcript |
| Effect of write-offs | Bank Statement LoansJudged on deposits, not taxable income | Conventional loanWrite-offs lower your qualifying income |
| Minimum FICO | Bank Statement Loans640+ | Conventional loanTypically 620+, but stricter income math |
| Occupancy | Bank Statement LoansPrimary, second home, or investment | Conventional loanPrimary, second, or investment |
| Loan amounts | Bank Statement LoansUp to $5M with tiered LTV | Conventional loanConforming / high-balance limits |
Does a bank statement loan use gross or net income?
A bank statement loan starts from gross deposits, then removes excluded deposits and, for business accounts, applies an expense factor. It does not use the net taxable income on your return. A conventional loan works the other way: under Fannie Mae’s Selling Guide the lender completes a cash flow analysis of your tax returns (Form 1084 or an equivalent), so the write-offs that lower your taxes also lower the income that counts.
What are Fannie Mae’s self-employment history rules?
For a conventional loan, Fannie Mae treats anyone with a 25% or greater ownership interest in a business as self-employed and generally requires a two-year history of the borrower’s prior earnings. Less than two years can be considered if your most recent signed tax returns show a full 12 months of self-employment income from the current business and the file documents prior income at the same or greater level in a field that provides the same products or services (Selling Guide B3-3.5-01).
Bank statement loan investors set their own history rules instead, which is why a newer business can sometimes qualify here when it can’t qualify conventionally.
Which write-offs does a conventional loan add back?
Some deductions are added back on a conventional loan because they don’t cost you cash each year. For Schedule C income, Fannie Mae requires the cash flow analysis to add back recurring depreciation, depletion, business use of a home, amortization and casualty losses (Selling Guide B3-3.6-03).
Ordinary cash expenses, such as supplies, advertising and contract labor, stay deducted. If those expenses are what shrink your taxable income, a bank statement loan may show more qualifying income than your returns can.
Compare with related programs
If your tax professional can prepare a P&L, the 3-month option pairs it with three months of statements instead of a 12- or 24-month average.
If most of your income arrives on 1099s rather than through a business operating account, qualifying directly off your 1099s can be cleaner than parsing deposits.
If your CPA already prepares a profit-and-loss statement, a P&L program can establish income without combing through 12–24 months of statements.
See all eight side by side in the self-employed loan program comparison.
What are the trade-offs of a bank statement loan?
- A bank statement loan usually costs more than a conventional loan, because non-QM loans aren’t backed by Fannie Mae or Freddie Mac.
- Not every deposit counts: business accounts get an expense factor, and transfers, loan proceeds and other non-income deposits are removed.
- Larger loans and investment properties generally require more equity and more reserves.
- Fewer lenders offer it, so guidelines and pricing vary more from one investor to the next.
When is a bank statement loan not a fit?
- Your tax returns already show the income you need. A conventional or FHA loan will usually cost less.
- Your business income is mixed with personal transfers you can’t separate or explain.
- You can’t yet show the self-employment history the investor requires (commonly two years).
- You want to qualify on a rental property’s rent instead of your own income. That is a DSCR loan, which we can discuss separately.
Bank statement loan FAQs
Do I really not need tax returns for a bank statement loan?
Correct: a bank statement loan requires no tax returns and no 4506-C transcript. You qualify with 12 or 24 months of bank statements instead. The lender still verifies your identity, assets, and credit, and still makes an ability-to-repay determination.
Can I use personal or business bank statements for a bank statement loan?
Both are eligible for a bank statement loan. Personal statements generally use a 0% expense factor, but the deposits should trace to your business. Business statements use an expense factor (often around 50%) to account for overhead, which a CPA letter can sometimes reduce.
What credit score do I need for a bank statement loan?
The program starts at a 640 FICO. A higher score can improve your loan-to-value tier and pricing, but 640 is the documented floor for this program.
How much can I borrow with a bank statement loan?
Loan amounts scale with your down payment: up to 90% loan-to-value to $1M, 85% to $2.5M, and 80% to $5M. Larger loans simply require more equity or down payment.
Why is my bank statement loan qualifying income lower than my total deposits?
Bank statement loan income comes in below total deposits for two reasons: an expense factor is applied to business accounts to account for overhead, and non-income deposits (internal transfers, loan proceeds, one-time sales) are excluded so they don’t inflate the figure.
How long do I need to have been self-employed for a bank statement loan?
Most bank statement loan investors look for about two years of self-employment. Some allow a shorter history with compensating factors such as strong reserves or a higher credit score. We match your file to the investor whose guideline fits your timeline.
Is the interest rate on a bank statement loan higher than on a conventional loan?
Yes, usually: a bank statement loan is a non-QM loan, and non-QM loans are generally priced higher than conventional loans because they aren’t backed by Fannie Mae or Freddie Mac. How much higher depends on your credit, equity and documentation, which is why we compare offers from multiple investors for your scenario.
Do bank statement loans require PMI?
Bank statement loans generally don’t carry private mortgage insurance (PMI). PMI is a feature of conventional loans made with a small down payment; non-QM investors instead account for risk through pricing and the equity and reserves they require.
Is a bank statement loan a no-doc loan?
No, a bank statement loan is an alternative-documentation loan, not a no-doc loan: your bank statements are the income documentation. For a home you will live in, the federal ability-to-repay rule (12 CFR 1026.43) requires the lender to make a reasonable, good-faith determination that you can repay, using income or assets verified with reliable third-party records.
Who can prepare a CPA letter or P&L for a bank statement loan?
For a bank statement loan, investors specify who can prepare an expense letter or P&L; most require a CPA, an IRS enrolled agent or another licensed tax preparer, and many won’t accept one you prepare yourself. Ask us before anyone starts, because the accepted list varies by investor.
Can I do a cash-out refinance with a bank statement loan?
Yes, cash-out is available on a bank statement loan, including delayed financing if you recently purchased a property with cash and want to pull equity back out.
Can I buy an investment property or second home with a bank statement loan?
Yes, bank statement loans are available for primary residences, second homes, and investment properties, including non-warrantable condos.
Is the interest rate higher than a conventional loan?
Non-QM programs are priced independently of conventional loans and vary by file. When more than one of the 25+ non-QM investor programs we underwrite to in-house fits your scenario, we lay their pricing side by side and walk you through how they differ, rather than accepting a single lender’s price.
Can I combine W-2 income with a bank statement loan?
On a bank statement loan, we can often blend documented W-2 income with bank statement income, or route you to the program that presents your combined picture most accurately. The qualifier quiz helps us see the full picture quickly.
Guideline notes
October 2026 update: a 3-month bank statement option is available when paired with a profit-and-loss statement prepared by a licensed tax professional (CPA, enrolled agent or licensed tax preparer). See the 3-month bank statement + P&L program page for how the statements and the P&L work together.
July 2026 update: 12-month and 24-month bank statement programs remain widely available across our non-QM investor set, and both personal and business account structures are eligible. Fixed-rate, adjustable-rate, and interest-only structures are still offered on qualifying files, and the right one depends on how long you plan to hold the home.
Documentation expectations have tightened modestly industry-wide: most investors want consecutive, un-doctored statements (all pages, including blanks) and a clear business narrative — a CPA letter or business license that ties the deposits to your work. Coming in organized shortens underwriting materially. Program availability and guidelines are subject to change without notice.
Guides for bank statement loans
- How Underwriters Calculate Your Income From Bank Statements
- Bank Statement Loan Requirements: What You Need to Qualify
- 12-Month vs. 24-Month Bank Statement Loans: Which Should You Choose?
- Personal vs. Business Bank Statements: Which Should You Use to Qualify?
- How to Prepare Your Bank Statements Before You Apply
- Non-QM vs. Conventional: When a Bank Statement Loan Makes More Sense
- Self-Employed Mortgage Options Compared (2026)
- Bank statement loans in Arizona
Sources
Federal rules and agency guides referenced on this page. Non-QM investors set their own guidelines, which vary by investor.
- CFPB: 12 CFR 1026.43, minimum standards for transactions secured by a dwelling (ability-to-repay rule) (opens in a new tab)
- CFPB: What is a Qualified Mortgage? (opens in a new tab)
- Fannie Mae Selling Guide B3-3.5-01: Underwriting Factors and Documentation for a Self-Employed Borrower (opens in a new tab)
- Fannie Mae Selling Guide B3-3.6-03: Income or Loss Reported on IRS Form 1040, Schedule C (opens in a new tab)
- Fannie Mae Selling Guide B3-6-02: Debt-to-Income Ratios (opens in a new tab)
- Fannie Mae Selling Guide B3-4.1-01: Minimum Reserve Requirements (opens in a new tab)
- IRS: Understanding your Form 1099-K (opens in a new tab)
Talk to the Cook Brothers Mortgage Team about your file
We check your scenario in-house against the 25+ non-QM investor programs we underwrite to, then run your file against the guidelines of the one that fits. Start with the two-minute qualifier or reach out directly.
Non-QM loan programs. Alternative income documentation required. All loans subject to underwriting approval, income/asset verification, and ability-to-repay determination. Not all applicants will qualify. Program availability and guidelines subject to change without notice.