Bank Statement Loan
A bank statement loan allows an eligible self-employed borrower to qualify using bank statements instead of tax returns. The lender reviews 12 or 24 months of statements, calculates an income figure from the money actually coming in, and underwrites the file from there.
It exists because the tax code and the mortgage process pull in opposite directions. Write-offs lower your taxable income, but it also shrinks the income a conventional lender will count. At Heimloan, we work with more than 100 lending partners and are licensed in 49 states to help borrowers find the right loan program for their deal.
Apply nowWhat Is a Bank Statement Loan?
A bank statement loan is a Non-QM mortgage that documents income through deposit history instead of tax forms. There are no tax returns, no W-2s, and no reliance on the adjusted gross income figure that often understates what a business owner really earns.
Everything else about the mortgage works normally. You still have a rate, a term, an appraisal, and a closing. The difference sits entirely in how the lender proves your income.
Who Can Qualify for a Bank Statement Loan?
The bank statement loan programs are designed around the self-employed borrower, and typically require you to have been self-employed for at least two years, with ownership of 25% or more in the business.
That covers a wide range of people:
- Business owners and partners
- Independent contractors and consultants
- Commission-earning professionals such as real estate agents
- Freelancers with variable monthly revenue
- Borrowers with 1099 income rather than W-2 wages
If your tax returns show strong revenue but modest net income after deductions, this is usually the structure that fits.
12 or 24 Months of Bank Statements
Most programs accept 12 or 24 months of bank statements, and you can generally use personal accounts, business accounts, or a combination.
A 12-month option suits a business whose recent performance is stronger than its longer history. A 24-month review smooths out seasonal swings and can produce a steadier qualifying figure when revenue moves around through the year.
The lender reviews every page, so send complete statements rather than summaries. Transfers between your own accounts are excluded, since they are not income, and unusually large or irregular deposits may need an explanation.
How Income Is Calculated for Bank Statement Loans
Two methods are common.
- Personal statements: The lender averages qualifying deposits over the review period, usually counting the full amount.
- Business statements: The lender applies an expense ratio method, deducting an assumed percentage for business costs before counting the income. A 50% factor is a common default, though a lower figure may apply where a CPA letter or an expense statement supports it.
The P&L only option is also available on some bank statement loan programs. A profit and loss statement prepared by a licensed tax professional supports the income, sometimes alongside a shorter period of statements. Not all lenders offer P&L-only qualification, so confirm with the lender whether this option is available and what documentation is required.
No Tax Returns, But Full Documentation Otherwise
The absence of tax returns does not mean no paperwork when qualifying for a bank statement loan. Lenders still verify your credit, assets, and reserves, order an appraisal, and confirm the business exists and is active, often through a license, a CPA letter, or a business listing.
What you don't need is the traditional personal income analysis based on tax returns. For many business owners, that single change is the difference between a declined file and an approved one.
Typical Requirements
| Requirement | Typical Standard |
|---|---|
| Self-employment history | Generally, two years or more |
| Statement period | 12 or 24 months of statements |
| Credit score | Commonly 620 to 660 and above, with better pricing at higher scores |
| Down payment | Often starting around 10% to 20%, depending on credit and program |
| Reserves requirement | Frequently 3 to 6 months of housing payments after closing |
| Occupancy | Primary residence, second home, or investment on many programs |
| Property type | Residential property, including condominiums on most programs |
These are common market standards rather than fixed rules. Each lender sets its own guidelines and overlays, and programs change.
Qualifying with 1099 Income
Borrowers paid through 1099 income have a separate route. Instead of statements, the lender uses one or two years of 1099 forms and applies an expense factor to arrive at qualifying income. For contractors with clean 1099 records and few business expenses, this often produces a stronger figure than a statement review.
We look at both approaches when they are available, since the same borrower can qualify for a noticeably different loan amount depending on the method used.
Self-Employed Mortgage Rates and Pricing
A self-employed mortgage documented this way generally prices above a comparable conventional loan. The lender does more manual work and accepts alternative documentation, and the rate reflects that.
The credit score, down payment, reserves, and the strength of the deposit history all influence pricing. Rates for self-employed mortgages move daily, so rather than publishing a figure that ages within hours, we shop our lending partners and bring you current terms for your file.
Get Current Terms for Your SituationHow to Prepare Your File for Bank Statement Loans
A well-prepared file prices better and closes faster. Before you apply:
- Gather complete bank statements for the full period (12-24 months), every page included
- Keep business and personal spending separated where possible
- Avoid overdrafts, since NSF activity raises questions during review
- Be ready to explain any deposit that falls outside your normal pattern
- Hold your reserves in an accessible account rather than moving funds around
Apply for a Bank Statement Loan with Heimloan
At Heimloan, we are mortgage experts, powered by Barrett Financial Group, with access to hundreds of loan products. Self-employed files are not standardized, which is exactly why shopping different lenders matters. One lending partner may apply a 50% expense factor while another accepts a CPA-supported figure, and that difference changes what you qualify for. If the property is a rental rather than a home you will live in, a DSCR loan may be the better route.
Send us 12 months of statements and we will tell you what the income looks like before you commit to anything. We average a 12-day clear to close once a file is underway.
See What You Qualify ForFrequently Asked Questions
What is a bank statement loan?
A bank statement loan is a Non-QM mortgage that qualifies a self-employed borrower using deposit history instead of tax returns. The lender reviews 12 or 24 months of statements, calculates qualifying income from the deposits, and underwrites the file on that figure.
Who qualifies for a bank statement loan?
Typically, borrowers who have been self-employed for at least two years and own 25% or more of the business qualify for a bank statement loan. That includes business owners, independent contractors, consultants, commission-based professionals, and freelancers with variable income.
Do I need tax returns for a bank statement loan?
No. Bank statement mortgage programs are built around the fact that no tax returns are required. The lender documents income through statements instead. Credit, assets, reserves, the appraisal, and proof the business is active are all still verified.
Should I use 12 or 24 months of statements for a bank statement loan?
The duration for which bank statements are required for a loan depends on your revenue pattern. A 12-month review suits a business whose recent performance is stronger than its longer history. A 24-month review smooths seasonal swings and can produce a steadier figure.
Can I use personal or business accounts for a bank statement loan?
Most bank statement programs accept either – a personal or business account, and some allow a combination. Personal statements usually count qualifying deposits in full, while business statements have an expense factor applied before the income is counted.
What is the expense ratio method?
The expense ratio method deducts an assumed percentage from business account deposits to account for operating costs. A 50% factor is a common default, and a lower figure may apply where a CPA letter or expense statement supports it.
What is the P&L only option?
Some lenders accept a profit and loss statement prepared by a licensed tax professional in place of a full statement review, sometimes alongside a short period of statements. Availability of P&L option varies by program, so confirm it before planning around it.
How is my qualifying income calculated for a bank statement loan?
A lender adds eligible deposits across the review period and divides by the number of months. Transfers between your own accounts are excluded, and unusual or irregular deposits may require an explanation or be removed.
What credit score do I need for a bank statement loan?
Bank statement programs commonly require a credit score in the mid-600 range, with better pricing available at higher scores. Credit also influences the down payment and leverage available to you.
How much down payment is required for a bank statement loan?
The down payment amount required for bank statement loan varies by credit profile and program, often starting somewhere around 10% to 20%. Stronger credit and more reserves generally improve the leverage a lender will offer.
What is the reserves requirement?
Most bank statement programs expect roughly 3 to 6 months of housing payments available after closing. Higher loan amounts or lower credit scores can increase that requirement.
Can I use 1099 income instead of bank statements?
Often yes. Some lenders offer a separate program using one- or two-years of 1099 forms with an expense factor applied. For contractors with few business expenses, this can produce a stronger qualifying figure than a statement review.
Can I buy an investment property with bank statement mortgage?
Many lenders allow primary residences, second homes, and investment properties, though terms differ by occupancy. Investment purchases typically require more down payment and carry different pricing.
Are bank statement mortgage rates higher than a conventional mortgage?
Generally, yes. A self-employed mortgage documented through statements involves more manual underwriting and alternative documentation, and pricing reflects that. Credit, leverage, and reserves all affect where your rate lands.
Do overdrafts affect my application?
Overdrafts may affect your bank statement loan application. Frequent NSF activity suggests cash flow strain and draws questions during review. Keeping accounts clear for the months leading up to an application helps the file considerably.
Does this page guarantee approval or specific terms?
No. The standards described here are typical market guidelines that vary by lender and change over time. Approval, pricing, and terms depend on full underwriting, the appraisal, and the lender's decision.
Disclaimer: Information on this page is for general educational purposes and describes typical market standards that vary by lender and program. It is not a loan offer, a commitment to lend, or financial advice. Credit standards, documentation requirements, leverage, and pricing change and are determined by the lender through full underwriting. Products are not available in all states or for all property types.