Bank Statement Loans - Mr. Mortgage

What a bank statement loan is

A bank statement loan qualifies you on the money moving through your accounts instead of the income on your tax returns. It is a non-QM loan, a category built for borrowers whose finances do not fit the standard checklist, and it is one of the programs I know best.

Business owners write off expenses to keep their taxable income low. That is smart for taxes, but it can make a healthy business look like a small income on paper. A bank statement loan looks at the deposits instead.

Who it fits

Business owners whose tax returns show less income than the business really brings in.
Freelancers, contractors and 1099 earners with steady deposits.
Real estate agents, gig workers and others who are paid on an uneven schedule.
Self-employed buyers who were told no somewhere else because of how their tax returns look.

How your income is calculated

Gather 12 or 24 months of statements, personal or business, whichever tells the clearer story.
Deposits are added up. Transfers between your own accounts and one-time deposits that are not income are set aside.
Business accounts get an expense ratio to account for the cost of running the business, either a standard ratio or one confirmed by your CPA or tax preparer.
The monthly average of what is left becomes the income used to qualify you.

Every lender calculates this a little differently, which is one reason the same statements can qualify for more in one place than another.

The basic requirements

Requirement	What to expect
Bank statements	12 or 24 months of personal or business statements, every page.
Self-employment	Usually two years in the same business or line of work, confirmed with a CPA letter, a business license or something similar.
Down payment	Often 10% or more, and higher with a lower credit score.
Credit score	Many programs start around 620, with better terms as your score climbs.
Reserves	Several months of payments left in savings after closing, depending on the loan.
Property	Primary homes, second homes and investment properties, from single family to 2 to 4 units.

These are typical guidelines. Bank statement loans are not government loans, so each lender sets its own rules.

Bank statement or conventional?

If your tax returns already show enough income, a conventional loan usually costs less. If they do not, a bank statement loan can get you into the home now.

	Bank statement	Conventional
Proof of income	12 or 24 months of bank statements	Tax returns, plus W-2s or 1099s
Down payment	Often 10% or more	3% for some first-time buyers, commonly 5%
Credit score	Many programs from about 620	Usually 620 or higher
Pricing	Usually higher than conventional	Usually lower, when you qualify
Often the better fit	Strong deposits, lower taxable income	Tax returns that already show enough income

Many owners start with a bank statement loan and refinance into a conventional loan later, once their tax returns catch up with what the business really earns.

What to have ready

12 or 24 months of bank statements, every page.
Proof you are self-employed, such as a CPA letter or business license.
A copy of your driver’s license.
Statements showing your down payment and reserves.
A completed online loan application.

Armando on my team sends the full checklist up front. Gather everything in one shot and this stage takes days, not weeks.

Bank statement loans.