Stewardship Capital
Bank Statement Loans for Self-Employed Borrowers
Many self-employed people earn well but show a small profit on their tax returns. Write-offs push the number down. A bank statement loan looks at the money moving through your accounts instead. This page explains how that works.
What is a bank statement loan?
A bank statement loan is a mortgage that uses the deposits in your bank statements to figure out your income. It does this in place of tax returns.
These are often called non-QM or non-agency loans. That means they do not follow the Fannie Mae and Freddie Mac rules. Each lender or investor sets its own guidelines, so details vary.
Why don't tax returns work for some self-employed people?
Write-offs are legal and smart. They lower the tax you owe. But a standard loan uses the net number on your returns, and that number can look small next to the cash your business really brings in.
The business is the same. The qualifying income is lower. A bank statement loan is built for that gap.
How does the lender figure out my income?
The lender does a deposit analysis. An underwriter adds up the deposits over the time period. Then they take out money that is not income, such as:
- Transfers between your own accounts
- Loan proceeds
- Refunds
- Large one-time deposits that cannot be explained
On business accounts, lenders often also remove a share to cover business costs. Some use a set percentage. Some ask for a profit and loss statement prepared by a tax professional. This varies by investor. The final number is divided by the months reviewed to get your monthly income.
Are there 12-month and 24-month options?
Yes. Both exist. Twelve months can fit someone whose income has grown recently. Twenty-four months can smooth out busy and slow stretches. Which choices are open to you varies by lender.
Do I use personal or business statements?
Depending on the program, either can be used. If your business income lands in a business account, lenders often use that account. Some programs use personal accounts. Lenders usually want to see that you own the business or are on the account. Stephen confirms what applies.
What documents will I need?
Documents commonly include:
- All pages of your bank statements for the period reviewed
- Photo ID
- Proof your business exists, such as a business license or a letter from a tax professional
- Statements for any savings or investments
- A profit and loss statement, if the lender asks
- The purchase contract, if you are buying
Credit and down payment rules vary by investor. Stephen reviews your file and tells you what applies. Nothing here is a promise of approval.
How can I get ready?
A few habits make the deposit analysis smoother:
- Keep business and personal money in separate accounts
- Deposit your business income into the same accounts each time
- Be ready to explain any large or unusual deposits
- Avoid moving money back and forth between accounts
- Do not open new credit before closing
What if I want to buy a rental property?
If the plan is an investment property, a different program may fit better. Our DSCR investor loans page explains loans that look at the rent a property earns. For a home you will live in, see our buy a home page.
Frequently asked questions
Can I use bank statements if I also file tax returns?
Yes. Many borrowers file returns and still choose a bank statement loan because the returns show less than they earn. The lender decides which documents a program needs.
How long do I need to be self-employed?
Lenders usually want a track record in your business. How long varies by program, so Stephen confirms it on your file.
What is the difference between 12-month and 24-month statements?
The number is how many months of deposits the lender reviews. Twelve months leans on recent income. Twenty-four months averages over a longer stretch. Availability varies by lender.
What deposits do lenders leave out?
Lenders usually leave out transfers between your own accounts, loan money, refunds and large deposits that are not explained. They may also apply an expense factor to business accounts.
Can I refinance with a bank statement loan?
Some programs allow it. Whether one fits depends on the lender and your situation. Our refinance page has the basics, and Stephen can check your options.
Ask Stephen to look at your statements
Share how your business gets paid. Stephen will tell you if a bank statement loan could fit and which documents to start gathering.
Talk with StephenThis is not a quote, a commitment to lend or an offer of credit. Stephen Chakerian, NMLS #2193331 | Stewardship Capital, a team of Barrett Financial Group, L.L.C., NMLS #181106 | Equal Housing Opportunity.