Short answer: A bank statement loan lets you qualify with 12 or 24 months of personal or business bank statements instead of tax returns. Lenders average your deposits, take out an expense factor for business accounts, and use what’s left as your income. You’ll still need acceptable credit, a down payment, cash reserves and proof that you’ve been self-employed, usually for about two years.
Bank statement loan requirements at a glance
| Requirement | What lenders typically look for |
|---|---|
| Bank statements | 12 or 24 consecutive months, personal or business |
| Self-employment history | Often 2 years, sometimes less with prior experience in the field |
| Proof of business | Business license, CPA letter, or similar documentation |
| Credit | Varies by program; higher scores get better pricing and lower down payments |
| Down payment | Commonly 10% to 20% or more, depending on credit and the property |
| Reserves | Several months of payments in savings after closing |
| Property types | Primary homes, second homes and investment properties |
What lenders actually look at in your statements
Average monthly deposits. The lender adds up eligible deposits over the 12 or 24 months and divides by the number of months. Twenty-four months smooths out seasonal swings. Twelve months can help if your income has grown recently.
The expense factor. On business accounts, a percentage of deposits is treated as business expenses. It’s commonly 50%, though it can be lower depending on the type of business, or your CPA can document your actual expense ratio. Personal accounts usually don’t get an expense factor, because the money has already been paid out to you.
What’s taken out. Transfers between your own accounts, loan proceeds, refunds and other one-time deposits usually don’t count as income.
Large or unusual deposits. Expect to explain any deposit that doesn’t match your normal pattern, such as a big client payment.
Overdrafts and NSFs. A few may be fine, but frequent overdrafts can be a red flag.
A quick example
Maria owns a design business. Her business account shows $480,000 in deposits over 24 months, or $20,000 a month. With a 50% expense factor, her qualifying income is about $10,000 a month. Her tax returns, after write-offs, showed only about $4,500 a month, not enough for the home she wanted. The bank statement loan made it work.
Personal vs. business statements
- Business statements: Use these if your clients pay your business account. An expense factor applies.
- Personal statements: Use these if your income flows into a personal account. Deposits are usually counted in full, but lenders may ask for business statements too, to make sure business expenses aren’t being paid from the same account.
Documents to have ready
- 12 or 24 months of complete bank statements (all pages)
- Business license or CPA letter showing how long you’ve been in business
- Government-issued ID
- Statements showing your down payment and reserves
- Purchase contract, or current mortgage statement if refinancing
Common reasons bank statement loans get delayed
- Missing pages. Lenders need every page of every statement, even the blank ones.
- Deposits that can’t be traced. Cash deposits and transfers from unknown accounts need explanation.
- Mixed accounts. If personal and business money run through one account, the lender may apply an expense factor or ask for more documentation.
- Declining deposits. If recent months are much lower than earlier ones, the lender may use the lower trend.
- Reserves that just arrived. Funds for the down payment and reserves should be in your account and documented.
How to get the best result
- Compare 12 and 24 months to see which gives you more qualifying income.
- Ask about your expense factor. Some businesses qualify for a lower one, or your CPA can document your actual expenses.
- Raise your credit score if you can. It affects both your rate and your down payment.
- Put down a little more if you can. A larger down payment often improves pricing.
- Plan your exit. If your tax returns will show more income next year, you may be able to refinance later.
Frequently asked questions
Do I need tax returns for a bank statement loan?
No. That’s the main point of the loan. Your bank statements take the place of tax returns for verifying income.
Is 12 months or 24 months better?
It depends on your income trend. If the last year was your best, 12 months may give you higher qualifying income. If income is seasonal or uneven, 24 months can be more stable. Some programs price the two differently.
Can I use more than one bank account?
Often, yes, as long as the accounts are clearly yours and transfers between them aren’t counted twice.
Can I refinance with a bank statement loan?
Yes. Bank statement loans can be used for rate-and-term refinances and cash-out refinances.
Can I switch to a conventional loan later?
Yes. Many borrowers refinance into a conventional loan once their tax returns show enough income. Ask about any prepayment penalty before you choose a program.
See if you qualify
Send us a rough idea of your monthly deposits and what you’re looking to buy or refinance, and we’ll tell you what you could qualify for. Learn more about bank statement loans, read how to get a mortgage when you’re self-employed, or call 949.423.3883.
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