The details
This program exists because tax returns punish the self-employed. Write-offs, depreciation, and business expenses shrink your on-paper income even when cash flow is strong. Bank statement lending skips the tax return entirely and looks at what actually hit your accounts.
Documentation is straightforward: 12 or 24 months of business or personal bank statements, a CPA letter if you want an expense factor below 50 percent, and the standard ID, asset, and credit package. The lender excludes transfers between your own accounts and any large undocumented deposits, so clean statements matter.
Pricing runs about 0.5 to 1.5 points above conventional rates. The gap shrinks with higher credit scores, bigger down payments, and 24 months of statements instead of 12. For many self-employed borrowers, the slightly higher rate beats the alternative, which is not qualifying at all.
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Related loan programs
Bank Statement Loans
A bank statement loan is a non-QM mortgage that calculates self-employed income from 12 or 24 months of personal or business bank deposits instead of tax returns.
P&L-Only Loans
A P&L-only loan qualifies a self-employed borrower using a 12- or 24-month profit and loss statement prepared or signed by a CPA, EA or licensed tax preparer, with no tax returns.
1099 Loans
A 1099 loan qualifies independent contractors using their 1099 forms (and sometimes a small expense factor) instead of full tax returns, so write-offs on Schedule C do not shrink your qualifying income..
Asset Depletion Loans
An asset depletion (asset utilization) loan converts your liquid assets into a monthly qualifying income, typically by dividing eligible assets by a set number of months, so retirees and investors with savings but little paycheck can qualify..
Frequently asked questions
Do bank statement lenders verify with the IRS?
No. That is the point of the program. Income is verified through bank deposits, not tax transcripts. The lender will not pull a 4506-C.
Can I use personal bank statements if I am self-employed?
Yes. Most programs accept personal statements, business statements, or a combination. Business statements usually get a higher expense factor applied.
What expense factor will the lender use?
Fifty percent is the default at most lenders. If your CPA documents that your actual business expenses are lower, many lenders will use the CPA figure, which raises your qualifying income.
How far back do the bank statements go?
Twelve or 24 months depending on the program. Twenty-four months smooths seasonal income and can improve pricing. Twelve months works when your recent deposits are strong.
Can I qualify with only 3 months of bank statements?
No. The minimum is 12 months at virtually every bank statement lender. Shorter histories do not meet the program guidelines.
More answers
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