A bank statement loan works by turning your deposits into qualifying income with one short formula. Here is the formula, the three ways it can be run, and the math on a real file.
Bank statement loans are mortgages for self-employed borrowers that use 12 or 24 months of bank statements as proof of income instead of tax returns. We add up the eligible deposits, apply an expense factor if the statements are from a business account, divide by the number of months, and qualify you on the result. A real underwriter reads the file. It is not a stated-income loan and it is not a computer decision. The JD.Mortgage Team runs bank statement loans for business owners, creators, agents, and contractors. 25+ years, 3,100+ closed loans, Scotsman Guide Top Originator 2026. Lending in 49 states. New York excluded.
Last updated: September 24, 2026
How Do Bank Statement Loans Work? The Short Answer
As of Q3 2026 (September 2026) (PRMG Non-QM Income Qualifying Product Profile, 09/17/2026): income is 12 or 24 months of deposits from one account; personal statements count 100% of eligible deposits and business statements use a 50% fixed expense ratio or a CPA-documented ratio; minimum credit 660 on Expanded Prime (620 on Non-Prime, capped at 43% DTI and 75% LTV); LTV up to 89.99% on purchase and rate-term and 80% on cash-out; maximum DTI 50% (45% on the 89.99% LTV tiers); loans to $3,500,000; reserves 3 to 12 months by loan amount; 2 years of self-employment (under 2 considered with 2 years in the same line of work).
You give us 12 or 24 months of statements from one account. We remove deposits that are not income (transfers, loans, gifts, refunds). If the account is a business account, we apply an expense factor: a flat 50%, a CPA expense letter, or a CPA profit and loss statement. If it is a personal account, there is no expense factor. We divide what is left by the months. That number is your monthly income, and we qualify you on it up to a 50% debt ratio.
Why Bank Statement Loans Exist
A regular mortgage looks at the bottom of your tax return. If you own a business, you write off trucks, tools, software, travel, and payroll. That is good tax planning. It also makes your tax return say you earn far less than your bank account shows. A business that brings in $400,000 and writes off $300,000 qualifies for a regular mortgage on $100,000. The bank statement loan looks at the $400,000 instead, then applies a fair expense factor. Same business. Bigger approval.
The Math, Step by Step
Add up the eligible deposits
Every deposit over 12 or 24 months from one account. Then remove the ones that are not income: transfers between your own accounts, loan money, gifts, tax refunds, and large deposits you cannot explain with an invoice or contract.
Apply the expense factor (business accounts only)
Option 1: a CPA-prepared profit and loss statement. We use its net income, and your deposits must land within 20% of its gross revenue. Option 2: a CPA expense letter that states your real expense ratio. Option 3: a flat 50% expense factor, no CPA needed. Then we multiply by your ownership share.
Divide by the months
12 or 24. The result is your monthly qualifying income.
Qualify on the result
Your new house payment plus your other monthly debts, divided by that income, must be 50% or less (43% with a score between 620 and 659). We also check that at least $2,500 a month is left over after every bill, plus $150 per dependent, on a primary or second home.
A worked example: $480,000 in business deposits
A Colorado Springs contractor owns 100% of his company. His business account shows $480,000 in eligible deposits over the last 12 months. Here is what each option does to his income.
| Calculation | Math | Monthly income |
|---|---|---|
| Flat 50% expense factor | $480,000 × 50% ÷ 12 | $20,000 |
| CPA expense letter at 30% | $480,000 × 70% ÷ 12 | $28,000 |
| CPA profit and loss statement | Net income on the P&L ÷ 12 (deposits within 20% of P&L revenue) | Whatever the books net |
| Personal statements instead | Deposits to the personal account ÷ 12, no expense factor | What he pays himself |
The gap between $20,000 and $28,000 is $8,000 a month of income. At a 50% debt ratio that is $4,000 a month of extra payment room. Same deposits. Different paperwork. That is why we never take the flat 50% without asking what the CPA can certify first.
Want to know which of the four numbers is yours? Send 12 months of statements and we run all of them before you shop.
Personal vs. Business Bank Statements
You use one or the other, never both on the same loan. The right pick depends on where your money lands first.
Business statements
Best when revenue hits the business account and mostly stays there. An expense factor is applied. You need to own at least 25% of the business, and we verify the EIN. Your share of the deposits is what counts, so a 50% owner gets half the number.
Personal statements
Best when the business pays you and the money lands in your personal account. 100% of the eligible deposits count with no expense factor. Two rules: we also need the two most recent months of business statements showing the transfers into your personal account, and no business receipts or expenses can be running through the personal account. If they are, the file has to go the business-statement route.
12 months or 24 months?
The review always starts with 12 months. If your latest year is your strongest, 12 months gives the higher number. If your income is seasonal (landscaping, farming, snow removal, tourism), 24 months is required so the slow months are in the average. Either way, the statements must be consecutive, from the same account, and the most recent available. Every page, including blank ones. No screenshots or transaction printouts.
Bank Statement Loan Requirements
| Requirement | Standard |
|---|---|
| Time self-employed | 2 years, and the business open 2 years. Under 2 years works with 2 years in the same line of work. Under 1 year does not. |
| Credit score | 620 floor (75% LTV, 43% debt ratio). 660 opens 80% LTV and a 50% debt ratio. 740 opens 89.99% LTV on a primary home. |
| Loan amount | $100,000 to $3,500,000 |
| Reserves | 6 months of payments up to $2,000,000 · 9 at $2,500,000 · 12 at $3,000,000 and up · 3 months on the lower-score program |
| Ownership | 25% or more to use business statements; EIN verified |
| Business check | Business narrative form, plus proof the business exists within 10 business days of closing |
| Transactions | Purchase, rate-and-term refinance, cash-out refinance |
| Occupancy | Primary, second home, or 1–4 unit rental |
| Not eligible | Cannabis-industry income; New York; Hawaii lava zones 1 and 2 |
What Kills a Bank Statement File
Most declines we see from other lenders were avoidable. Five things do the damage.
- Overdrafts and NSFs. One or two in the last 12 months get explained. A pattern can end the file.
- Mixed accounts. Business receipts in a personal account forces the business route, and the expense factor comes with it.
- Big deposits with no paper. A $40,000 deposit with no invoice or contract behind it gets pulled out of the total.
- Transfers counted as income. Money moving between your own accounts is not income. Underwriters catch it every time.
- Someone on the account who is not on the loan. Every name on a statement used for income has to be a borrower.
Falling deposits are the sixth. If this year is clearly below last year, the underwriter can decline or use the lower figure. Growing or steady is what we want to show.
Bank Statement Loan vs. Regular Mortgage vs. 1099 Loan
| Feature | Bank statement loan | Regular mortgage | 1099 loan |
|---|---|---|---|
| Income proof | 12 or 24 months of deposits | 2 years of tax returns | 1 or 2 years of 1099s + YTD deposits |
| Write-offs matter? | No (expense factor instead) | Yes, fully | No, 100% of gross |
| Lowest score | 620 | 620 typical | 620 |
| Down payment | 10% to 20% typical | 3% to 20% | 10% to 20% typical |
| Max loan | $3,500,000 | County limit, then jumbo | $3,500,000 |
| Who reads it | A real underwriter | Automated system first | A real underwriter |
If your clients send you 1099s, read 1099 vs. bank statement loan before you pick. The 1099 path counts 100% of gross with no expense factor, so it often wins. We run both.
Who Bank Statement Loans Are For
Sole proprietors, single-member LLC owners, S-corp owners, partners with K-1 income, contractors, gig workers, content creators, real estate agents, consultants, and tradespeople. The common thread is a tax return that understates what the business really makes. They are not for W-2 employees, and not for self-employed borrowers whose tax returns already show enough income, because a regular mortgage will price better for them.
Bank Statement Loan Frequently Asked Questions
How do bank statement loans work?
We add up 12 or 24 months of eligible deposits from one account, apply an expense factor if it is a business account, divide by the months, and qualify you on that monthly income up to a 50% debt ratio. No tax returns are used. A real underwriter reviews the statements, the business, and the credit.
How is income calculated on a bank statement loan?
Business statements: eligible deposits, times your ownership share, minus an expense factor (flat 50%, a CPA expense letter, or a CPA profit and loss), divided by 12 or 24. Personal statements: eligible deposits divided by 12 or 24 with no expense factor. On $480,000 of business deposits, the flat 50% gives $20,000 a month and a 30% CPA letter gives $28,000.
How many months of bank statements do I need?
12 months is the starting point. 24 months is required when income is seasonal, such as landscaping, farming, or tourism, so the slow months are averaged in. Statements must be consecutive, from the same account, and the most recent available, with every page included.
What credit score do you need for a bank statement loan?
620 is the floor, with a 75% loan-to-value cap and a 43% debt ratio. A 660 score opens 80% loan-to-value and a 50% debt ratio. A 740 score opens 89.99% loan-to-value on a primary home up to $1,500,000. Higher scores also lower the reserve requirement on the same loan size.
What is the typical down payment on a bank statement loan?
10% to 20% on a primary home. 10% needs a 740 score and a loan up to $1,500,000. 15% needs a 680. 20% works from 660. Second homes and rentals start at 20% down. Loans above $2,500,000 need 25% to 30%. Gift funds are allowed once you have put in 5% of your own money.
Can I use personal bank statements instead of business statements?
Yes, and it often gives a higher number because there is no expense factor. Two conditions: we need the two most recent months of business statements showing transfers into your personal account, and the personal account cannot have business receipts or expenses running through it. You cannot combine personal and business statements on one loan.
Do I need a CPA for a bank statement loan?
Not always. On business statements the flat 50% expense factor needs no CPA at all. A CPA expense letter or a CPA profit and loss statement is only needed if you want a lower expense ratio, which raises your income. One catch: if any document in the file already shows expenses above 50%, the flat 50% option is off the table.
What deposits do not count on a bank statement loan?
Transfers between your own accounts, loan proceeds, gifts, tax refunds, insurance payouts, and large or unusual deposits you cannot document with an invoice or contract. W-2 wages deposited into the account are documented separately, not averaged in. Everything left is what gets divided by the months.
Can I do a cash-out refinance with a bank statement loan?
Yes. Cash-out goes to 80% loan-to-value on a primary home with a 740 score, 75% with a 680, and 70% with a 660. You must have owned the home for 6 months, and cash-out is capped by loan-to-value. Texas primary homes follow the state’s home equity rules: 30-year fixed, 1 unit, 80% maximum.
Are bank statement loans the same as stated income loans?
No. Stated income loans let borrowers declare an income with no proof, and they were shut down by the ability-to-repay rules after 2008. A bank statement loan documents income with 12 or 24 months of real deposits, a business narrative, ownership proof, and a business verification. It is a verified-income loan that uses different paperwork.
Does a computer approve a bank statement loan?
No. This program is not run through an automated approval system. A real underwriter reads every deposit, applies the expense option, and reviews your business narrative. That is why a file that a computer declined elsewhere can clear here when the story behind the deposits is clear.
What if I have been self-employed for less than two years?
Less than 2 years can work if you have at least 2 years of documented work in the same line of business, for example a W-2 electrician who opened his own shop 18 months ago. Less than 1 year self-employed is not allowed on this program, and the business itself needs to have existed for 2 years.
Related Resources
1099 vs. Bank Statement Loan
1099 Loans
Self-Employed Income Rules
Bank Statement Loans in Colorado Springs
All Self-Employed Loan Programs →
About the Author
J.D. Peck is an Area Manager and Mortgage Loan Originator (NMLS #314883) with the JD.Mortgage Team at Paramount Residential Mortgage Group, Inc. (NMLS #75243), based in Colorado Springs. 25+ years, 3,100+ closed loans, Scotsman Guide Top Originator 2026. Lending in 49 states. New York excluded.
Last updated: September 24, 2026. Bank statement loan facts sourced from investor guidelines on file. Program limits change; we confirm current terms on your file before you rely on any figure shown.
Find Out Which Number Is Yours
Your deposits already exist. The only open question is which calculation your file clears under. Send 12 months of statements and we run every option before you shop.
Source: JD.Mortgage Team at PRMG, How Do Bank Statement Loans Work? The Math, the Three Expense Options, and a Real Example, updated September 2026, https://jd.mortgage/how-do-bank-statement-loans-work/
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