Programme
Bank Statement Loan
Income read from deposits rather than from returns, for people whose write-offs are legitimate.
A bank statement loan derives your income from 12 or 24 months of deposits instead of from tax returns. It exists because the tax code and the mortgage rulebook disagree: a self-employed borrower is rewarded for deducting every legitimate expense, and then judged on the net figure that produces. This programme reads the top line instead. It is a real solution to a real problem — and it is not a Qualified Mortgage, which changes the legal footing of the loan in a way that deserves to be stated plainly rather than buried.
- 12 or 24 months of statements
- Personal or business accounts
- An expense factor is applied
- Not a Qualified Mortgage
Floor four
What it gives you
Legitimate deductions stop counting against you
Vehicles, equipment, home office, depreciation — all of it reduces taxable income and none of it reduces the money that arrived in the account. A bank statement programme measures what came in, so a well-run business with aggressive but lawful accounting is no longer penalised twice.
It reflects the current year, not the last two
Tax returns describe a year that has already ended. A 12-month statement programme sees the last twelve months, which for a growing business is a materially better picture than a return filed for a year when the business was smaller.
No tax transcripts to wait on
Filing extensions, amended returns and IRS backlogs derail conventional self-employed files regularly. A statement-based file does not depend on any of that.
It works for irregular income patterns
Seasonal trades, commission-heavy roles and businesses with lumpy receivables average out over twelve or twenty-four months in a way that a snapshot of pay stubs never captures.
Floor three
What this programme costs you
Every programme buys you something by charging you something else. This is the half a brochure leaves out, and it is the half that decides whether the programme is right for you.
- Trade-off 01
It is not a Qualified Mortgage, and that is a legal difference, not a paperwork one
Because the income is not verified in the way the Qualified Mortgage standard requires, these loans are generally not QMs. The ability-to-repay rule still applies — the lender must still make a reasonable and good-faith determination that you can repay — but the loan does not carry the presumption of compliance that attaches to a QM. That presumption is the safe harbour, and it is the difference the pricing on this product reflects. Anyone selling you a bank statement loan purely as 'flexible documentation' is describing the convenience and skipping the substance.
- Trade-off 02
The expense factor can be brutal, and it is not negotiable in the moment
Deposits into a business account are not income; the programme reduces them by an expense factor before anything counts. A 50% factor means a year of $400,000 in deposits qualifies like $200,000 — even if your real margin is far better. A CPA or tax-preparer letter supporting a lower factor is the usual remedy, and it must be obtained before the file is submitted. Borrowers routinely find they qualify for less here than on the tax returns they thought were the problem.
- Trade-off 03
It costs more, in rate and in down payment
The investor pool for non-QM paper is smaller and the risk assessment is different, so both the pricing and the required down payment sit above a conventional loan's. If your returns would actually support the loan, the conventional route is the cheaper one and it is worth testing first.
- Trade-off 04
Deposits that are not revenue get stripped out
Transfers between your own accounts, loan proceeds, one-off asset sales and gifts are excluded, and an underwriter will go looking for them. A statement that looks strong on the total can qualify for much less once the non-revenue deposits are removed, so it is worth doing that arithmetic yourself first.
Floor two
The published rules, and where they come from
These are rules, not prices. This site publishes no rates, so what follows is the part of the programme that is written down somewhere a third party can check.
| Rule | What it says | Source |
|---|---|---|
| How income is calculated | From 12 or 24 months of consecutive bank statements. Deposits are totalled, non-revenue items are removed, and business-account deposits are reduced by an expense factor before the result is used as qualifying income. | Investor programme guidelines — there is no agency bank-statement programme |
| The expense factor | A fixed percentage set by the programme, or a lower percentage supported by a letter from a CPA or licensed tax preparer attesting to the business's actual expense ratio. | Investor programme guidelines |
| Qualified Mortgage status | Income documented this way does not satisfy the verification requirements of the Qualified Mortgage standard, so these loans are generally not Qualified Mortgages and do not carry the QM presumption of compliance. | 12 CFR 1026.43(e); Appendix Q to Part 1026 |
| Ability to repay still applies | On an owner-occupied consumer loan, the lender must still make a reasonable and good-faith determination of the borrower's ability to repay. Non-QM removes the safe harbour, not the obligation. | 12 CFR 1026.43(c) |
| Prepayment penalty | A prepayment penalty is prohibited on a consumer mortgage that is not a Qualified Mortgage, so an owner-occupied bank statement loan cannot carry one. | 12 CFR 1026.43(g) |
| Down payment, credit and reserves | There is no public minimum. Each is set by the investor and is typically stricter than the agency equivalent. | Investor programme guidelines |
Floor one
Who it fits
The usual guidelines. Every one of them is a starting point that an underwriter reads against the whole file, so treat a line you miss as a conversation rather than a closed door.
- Self-employment, generally with a two-year history in the same business
- 12 or 24 months of consecutive personal or business bank statements, depending on the programme
- An expense factor applied to business account deposits, or a lower factor supported by a CPA or tax-preparer letter
- A credit score and down payment set by the investor, both typically above conventional minimums
- Post-closing reserves
- Available on a principal residence, a second home or an investment property, at different terms
Ground floor
How it goes, top to bottom
Test the conventional route first
If two years of returns support the payment you need, a conventional loan is cheaper. A bank statement programme is the answer to a specific problem, not a default.
Do the deposit arithmetic yourself
Add the twelve or twenty-four months, strip out transfers and anything that is not revenue, and apply the programme's expense factor. That number is your income for this loan, and knowing it early avoids an expensive surprise.
Get the CPA letter if a lower expense factor applies
If your true margin is better than the default factor, a letter from a licensed preparer can support a lower one. It has to be in the file before submission, and it is the single biggest lever you have.
Underwriting
Statements, credit, assets, reserves and the property. Expect questions about specific deposits, and expect to answer them in writing.
Closing
Read the note. Confirm the rate, the term, whether there is any prepayment provision, and check the Closing Disclosure against the Loan Estimate.
Bank statement documentation against full documentation
| Feature | Bank statement | Full documentation |
|---|---|---|
| What proves income | 12 or 24 months of bank statements | Two years of returns, W-2s or K-1s, and current pay stubs |
| What counts as income | Deposits, less non-revenue items, less an expense factor | The net figure the returns already show |
| Qualified Mortgage | Generally not | Usually yes |
| Ability-to-repay obligation on the lender | Applies | Applies |
| Presumption of compliance | None — the safe harbour does not attach | Safe harbour at or below the pricing threshold |
| Prepayment penalty | Prohibited on a consumer non-QM | Tightly restricted |
| Cost | Higher rate and a larger down payment | The cheaper of the two |
| Who it suits | A self-employed borrower whose lawful write-offs bury a real income | A borrower whose returns already show what they earn |
This table scrolls sideways on a narrow screen.
Questions this raises
How many months of statements do I need?
Twelve or twenty-four, depending on the programme. Twenty-four months smooths a seasonal or lumpy business and often prices better; twelve months captures growth and is the better choice for a business that has expanded recently. Whichever it is, the months must be consecutive and the most recent, and every page of every statement is required — not summaries.
Why is only half of my deposits counted?
Because deposits into a business account are revenue, not income, and the programme applies an expense factor to estimate what is left after the costs of running the business. The default factor is conservative by design. If your actual expense ratio is lower, a letter from your CPA or licensed tax preparer supporting that figure can reduce it — but it has to be in the file before submission, so raise it at the start.
Is a bank statement loan the same as a stated income loan?
No. A stated income loan asked you to declare a figure that was not verified, and that product is essentially gone because the ability-to-repay rule requires verification. A bank statement loan verifies income — it just verifies it from a different document. The lender still has to make a reasonable and good-faith determination that you can repay; what it does not get is the Qualified Mortgage presumption that the determination was compliant.
Can I refinance into a conventional loan later?
Frequently, yes, and it is often the sensible plan. Two years of returns showing the income you actually earn, or a change in how the business is structured, can make a conventional approval possible later at conventional pricing. Because a consumer non-QM loan cannot carry a prepayment penalty, there is nothing standing in the way of refinancing when the file supports it.
Put your own numbers through it
How much house is defensible? The affordability page prints the rule it followed beside the answer, and the address bar carries your inputs so the link you send is the answer you saw.
Or read every programme side by side.