Bank Statement Loans for Self-Employed Borrowers

Bank statement loans allow self-employed borrowers, business owners, and 1099 earners to qualify for a mortgage without providing tax returns. Instead of W-2s or filed income, lenders use 12 to 24 months of bank statements to calculate qualifying income.

This loan program is ideal for borrowers whose tax write-offs reduce taxable income but who have strong real cash flow.

How Bank Statement Loans Work

Bank statement loans allow self-employed borrowers to qualify for a mortgage using real cash flow instead of tax returns. Rather than reviewing W-2s or filed income, lenders analyze bank deposits to determine a borrower’s ability to repay the loan.

Here’s how the process works:

• 12 or 24 Months of Bank Statements: Lenders typically review either 12 or 24 months of personal or business bank statements. A longer history can improve income stability and loan terms.
• Deposit-Based Income Calculation: Monthly deposits are averaged to determine qualifying income. For business statements, lenders often apply an expense ratio to account for operating costs.
• Personal vs. Business Accounts: Personal bank statements may be used at 100% of deposits, while business statements usually require an expense factor based on the industry or lender guidelines.
• No Tax Returns Required: Because qualification is based on deposits and cash flow, borrowers are not required to provide tax returns, W-2s, or traditional income documentation.

This flexible approach makes bank statement loans ideal for self-employed borrowers whose tax write-offs reduce their taxable income but who maintain strong, consistent cash flow.

Who Qualifies for a Bank Statement Loan

Bank statement loans are designed for borrowers with strong cash flow who do not qualify easily under traditional income documentation rules. Instead of tax returns, lenders focus on income consistency, credit profile, and overall financial strength.

Common borrowers who qualify include:

• Self-Employed Borrowers: Business owners, entrepreneurs, and sole proprietors with consistent deposits.
• Freelancers: Borrowers with project-based or variable income who receive regular deposits but lack W-2 documentation.
• Independent Contractors: 1099 earners working under contract arrangements without traditional payroll income.
• Business Owners: Borrowers who retain earnings in their business and minimize taxable income through deductions.
• Real Estate Investors: Investors with strong cash flow but complex or write-off-heavy tax returns.

Key qualification factors typically include:

• Credit Score: Most programs require credit scores in the mid-to-high 600s or higher.
• Documented Cash Flow: Lenders review 12 to 24 months of bank statements to verify consistent income.
• Down Payment: Minimum down payments generally range from 10% to 20% depending on the loan program.
• Cash Reserves: Verified reserves help dmonstrate financial stability and reduce lender risk.

Because qualification is based on cash flow rather than taxable income, bank statement loans are ideal for borrowers whose tax returns do not accurately reflect their true earning power.

Bank Statement Loan Rates & Terms

Rates for bank statement loans are typically higher than traditional conventional loans due to alternative income documentation. Terms vary by lender and borrower profile.

• Loan amounts: vary by program
• LTV: typically up to 90%
• Credit scores: commonly 620+
• Occupancy: primary, second home, and investment

Bank Statement Loan FAQs

How many bank statements are required?

Most programs require either 12 or 24 months of bank statements.

Can I use business bank statements?

Yes. Both personal and business bank statements may be used depending on the program. Multiple accounts may be used.

Are bank statement loans available for investment properties?

Yes, many programs allow financing for primary residences, second homes, and investment properties.

Work With a Bank Statement Loan Specialist

ABO Capital specializes in non-QM lending solutions for self-employed borrowers and real estate investors. Our team understands complex income structures and works with multiple lenders to find the right fit.