What Is a Bank Statement Loan?
A bank statement loan is an alternative-documentation mortgage, commonly offered through non-qualified mortgage (Non-QM) programs, designed primarily for self-employed borrowers.
Instead of qualifying income solely from tax returns, pay stubs and W-2s, participating lenders may evaluate eligible deposits over a specified period. Depending on the program, a review may include:
- Personal or business bank statements, often covering 12 or 24 months
- Business ownership percentage and operating history
- Expense factors applicable to the business
- Credit profile, monthly obligations, assets and reserves
- Property type, occupancy and loan-to-value ratio
Alternative documentation still means underwriting. A lender must evaluate your qualifications and ability to repay. Not every deposit counts as income, and program requirements vary.
Who Might Benefit?
Bank statement programs may be worth exploring when cash flow is stronger than the taxable income reflected on your returns.
Business owners
Your business generates substantial deposits, while legitimate deductions reduce reported taxable income.
Partners and professionals
Attorneys, physicians and consultants may have partnership or business income that requires a closer look.
Independent contractors
Your 1099 income may fluctuate month to month even when your overall cash flow is strong.
Entrepreneurs and investors
Multiple businesses, properties or income sources can make traditional documentation more complicated.
Being self-employed does not automatically make a bank statement loan your best option. A conventional mortgage may also be available.
How Does a Bank Statement Mortgage Work?
We review your scenario
Start with your financing goal, approximate loan amount, property value, credit profile and how your income is generated.
We compare available programs
Wholesale lenders may calculate bank statement income differently. Stan can review relevant options available through West Capital Lending’s network.
Your statements are evaluated
The lender reviews eligible deposits over the required period and applies its income calculation, ownership and expense guidelines.
We compare the loan structure
Review the rate, APR, monthly payment, closing costs, fixed or adjustable terms, any interest-only period, reserve requirements and loan-to-value limits. Discuss any applicable prepayment provisions.
The objective is to find a structure that fits your financial circumstances and borrowing plans.
Bank Statement Loan vs. Conventional Mortgage
The main difference is how qualifying income is documented and calculated.
| Consideration | Conventional mortgage | Bank statement mortgage |
|---|---|---|
| Income review | Traditional documentation. For self-employed borrowers, tax returns and business information are commonly used. | Eligible personal or business deposits, subject to the program’s income methodology. |
| Potential fit | Borrowers whose documented income supports conventional qualification. | Self-employed borrowers whose cash flow may support qualification using alternative documentation. |
| Pricing and terms | Depend on credit, equity, loan type and market conditions. | Depend on the same scenario factors plus the lender’s alternative-documentation program. |
| Approval | Subject to underwriting and applicable loan guidelines. | Subject to underwriting and applicable loan guidelines. |
Compare the full cost and terms of each available option before choosing.
Personal vs. Business Bank Statements
Some programs accept personal statements; others use business statements. The lender’s calculation can differ considerably.
For business accounts, a lender may apply an expense factor to estimate the portion of deposits available as qualifying income. Ownership percentage and the nature of the business may also matter.
Personal accounts are reviewed for eligible income deposits. Transfers between accounts, loan proceeds and other non-income deposits may be excluded or require explanation.
Two lenders may review the same statements and arrive at different qualifying income. Comparing programs can help identify which methodology fits your situation.
How Much Can I Borrow?
There isn’t a single loan amount or down-payment requirement that applies to every bank statement program. Your options depend on:
- Property value, requested loan amount and occupancy
- Credit history and credit score
- Down payment or available equity
- Calculated qualifying income and monthly obligations
- Assets, reserves and lender guidelines
Higher loan amounts may be available through certain jumbo and Non-QM programs. An initial scenario review helps narrow the available options.
What Documents Should I Have Ready?
You don’t need to assemble a complete loan file before asking about your options. A preliminary conversation can start with your goal and approximate financial details.
Depending on the program, the lender may eventually request:
- 12 or 24 months of personal or business bank statements
- Identification and property information
- Business ownership and operating documentation
- Asset statements and reserve documentation
- Your current mortgage statement, if refinancing
- Homeowners insurance information
- Credit authorization and any additional underwriting documents
Discuss a secure document-delivery method with Stan before sending statements. Please do not enter bank account numbers or upload financial documents into the site’s preview.
Common Questions
Are bank statement mortgage rates higher?
Bank statement programs can carry higher rates or costs than conventional agency mortgages. The actual comparison depends on your credit, equity, loan amount, property, occupancy and current pricing. Compare rate, APR, points, fees and the complete loan structure.
Can I use a bank statement loan to refinance?
Potentially, yes. Depending on eligibility and available programs, bank statement financing may be used for rate-and-term refinances, cash-out refinances and home purchases.
Are second homes and investment properties eligible?
Certain programs allow primary residences, second homes or investment properties. Occupancy, property type and the lender’s guidelines affect eligibility and terms.
Do all of my bank deposits count as income?
No. The lender reviews which deposits are eligible, identifies transfers and other non-income items, and applies its expense and ownership calculations where required.
Will I need tax returns?
Some bank statement programs qualify income without tax returns. Requirements vary, and business verification or other documentation may still be needed. Stan can confirm the requirements for the programs relevant to your scenario.
What if I qualify for a conventional loan?
A conventional mortgage may offer a suitable alternative. The initial review can consider traditional documentation, bank statements, asset-based qualification and other available structures.
Not sure which loan fits your situation?
Tell Stan what you’re trying to accomplish. GetRateNow helps borrowers explore relevant mortgage options through West Capital Lending’s wholesale lending network.
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For educational purposes only. Loan programs, rates, terms and eligibility may change. All loans are subject to credit approval, property appraisal, underwriting requirements and applicable lender guidelines. This page is not a commitment to lend or a guarantee of approval, rate, loan amount or terms. Program availability depends on borrower qualifications, property, state licensing and lender requirements.