Loan option
Bank statement loans
A bank statement loan derives qualifying income from deposits into your business or personal accounts over a defined period, instead of from tax returns. It suits business owners whose returns understate the cash the business produces.
How it works
How bank statement loans work
The lender reviews a set number of months of statements and calculates qualifying income from the deposits, after excluding transfers and other non-revenue items. An expense factor is then applied to approximate the business's costs, so qualifying income is a portion of deposits rather than the full amount.
That expense factor is where lenders differ most. Some use a fixed percentage, some vary it by industry, and some will accept a lower factor supported by a letter from your CPA or licensed tax preparer. The difference materially changes how much you qualify for.
Everything else is underwritten normally: credit, reserves, the down payment, the property and the appraisal. Pricing is generally different from standard conventional financing, because these loans are not sold under agency guidelines.
What to weigh up
- Check standard conventional financing first. Conventional guidelines have an established method for self-employment income, and when it works it is usually less expensive.
- Keep business and personal accounts clean and separate in the period before you apply. Large unexplained deposits create work and can be excluded.
- Not all occupancy types and property types are eligible, and availability varies by lender.
Set by the lender, not by us
These vary between lenders and change over time. Nothing on this page is a quote, an approval, or a commitment to lend.
- Number of months of statements required, and whether business or personal accounts are used
- The expense factor applied, and whether a CPA letter can reduce it
- Minimum credit score, reserves and maximum loan-to-value
- Minimum self-employment history required
- Occupancy and property types accepted
Nothing on this page is a rate quote, an approval, or a commitment to lend. Figures and requirements change, and they depend on your file.
Bank statement compared with conventional, for self-employed borrowers
Conventional guidelines already have a method for self-employment income. The question is whether that method reflects what your business actually produces.
Income basis
- Bank statement loan
- Qualifying deposits over a defined period, less an expense factor that approximates business costs.
- Conventional
- Net income calculated from personal and business tax returns under agency guidelines.
Tax returns
- Bank statement loan
- Generally not used to calculate income.
- Conventional
- Required, usually with business returns as well.
The variable that moves the answer
- Bank statement loan
- The expense factor the lender applies. Some vary it by industry; some will lower it on a letter from your CPA or licensed tax preparer.
- Conventional
- The add-backs and deductions the guideline calculation allows.
When it helps
- Bank statement loan
- When write-offs reduce net income well below the cash the business generates.
- Conventional
- When the guideline calculation already supports the loan amount you need.
Pricing
- Bank statement loan
- Non-agency, and generally priced differently from conventional financing.
- Conventional
- Agency pricing.
What is still underwritten
- Bank statement loan
- Credit, reserves, the down payment, the property and the appraisal — all of it.
- Conventional
- The same, plus the full documentation set.
Test conventional first. It is the less expensive route when it works, and being self-employed does not disqualify you from it. Alternative documentation is the answer when the guideline calculation understates your income — not a default for anyone who owns a business.
Terms used on this page
- Bank statement loan
- A loan that derives qualifying income from deposits into business or personal accounts over a defined period, with an expense factor applied, instead of from tax returns.It is not a no-documentation loan. Credit, reserves, the property and the appraisal are underwritten as usual.
- Underwriting
- The lender's assessment of whether to make the loan: the borrower, the property, the documentation and the risk, measured against the program's guidelines and the lender's own overlays.No mortgage program skips underwriting. Programs described as "no income verification" change what is documented, not whether the file is reviewed.
- Reserves
- Funds you still hold after closing, usually expressed as a number of months of housing payments, which a lender requires as a cushion.Funds counted as reserves generally cannot also be counted as qualifying income under an asset depletion calculation.
Questions about this program
- Is this a no-documentation loan?
- No. It documents income differently. You provide statements instead of tax returns, and the rest of the file — credit, assets, reserves, the property, the appraisal — is underwritten as usual.
- How is my income calculated from the statements?
- The lender totals qualifying deposits over the review period, removes transfers and non-revenue items, and applies an expense factor to approximate business costs. The result is the qualifying income. The method and the factor are set by the lender.
- Should I try a conventional loan first?
- Usually, yes. Conventional guidelines set out how to calculate self-employment income from tax returns, and where that calculation supports the loan it is normally the better outcome. Alternative documentation is the answer when it does not.
Official sources
Program rules are set by these organizations and are updated periodically. Where this page and an official source disagree, the official source is correct.
- Explore loan options (opens in a new tab) — Consumer Financial Protection Bureau
- Selling Guide (opens in a new tab) — Fannie Mae
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Talk it through before you start shopping
Bring your situation, not your paperwork. A first conversation is about which programs actually fit and what the numbers look like — no documents, no credit pull, no commitment.