Bank Statement Loans
If you’re self-employed, you know how frustrating it can be to qualify for a mortgage. Traditional lenders rely on tax returns, W-2s, and pay stubs—documents that don’t always reflect your true income if you take advantage of business deductions. That’s where a Bank Statement Loan can be the game-changer.
What is a Bank Statement Loan?
A Bank Statement Loan is an alternative mortgage program that allows self-employed borrowers, freelancers, and business owners to use their bank statements instead of tax returns to prove their income. This loan type is designed for individuals who earn enough to afford a home but struggle to meet conventional lending requirements due to tax write-offs.
How Do Bank Statement Loans Work?
Unlike traditional mortgages, which rely on taxable income, a Bank Statement Loan looks at 12 to 24 months of bank statements to determine income. Here’s the process:
Provide Your Bank Statements – Choose either personal or business statements.
Income Calculation – If using business statements, a lender applies an expense factor (usually 10%-50%). If using personal statements, 100% of deposits count as income.
No Tax Returns Required – Lenders base your loan eligibility on actual deposits, not tax-adjusted earnings.
Who Should Consider a Bank Statement Loan?
These loans are ideal for:
Self-employed individuals and business owners
Freelancers and independent contractors
Gig economy workers (consultants, creatives, rideshare drivers)
Real estate investors and landlords
Medical professionals and attorneys with private practices
Benefits of a Bank Statement Loan
1. No Need for Tax Returns
Traditional mortgage applications require tax documents, which often don’t reflect your full earning potential. A Bank Statement Loan removes that barrier.
2. Higher Loan Amounts
Because lenders use real cash flow instead of reported income, borrowers often qualify for larger loan amounts.
3. Flexible Debt-to-Income (DTI) Ratios
Self-employed income fluctuates. Bank Statement Loans allow for higher DTI ratios compared to traditional loans.
4. Can Be Used for Various Property Types
These loans aren’t just for primary residences—they also work for second homes and investment properties.
Bank Statement Loan Requirements
While guidelines vary by lender, here are the standard qualifications:
Credit Score – Minimum 600+ (higher scores get better rates)
Down Payment – 10%-20% depending on credit profile
Self-Employment History – At least 2 years of self-employment
Loan Amounts – Up to $10 million available
Reserves – Some lenders require 3-6 months of cash reserves
Interest Rates and Loan Terms
Bank Statement Loans typically have slightly higher interest rates than conventional loans. Rates depend on:
Credit score
Down payment size
Loan amount and term (15 or 30 years, etc.)
Loan-to-value (LTV) ratio
While rates are higher, the ability to qualify without tax returns makes these loans a strong option for self-employed borrowers.
Common Myths About Bank Statement Loans
1. “These Loans Have Unaffordable Interest Rates”
Rates are slightly higher than conventional loans, but they are competitive considering the flexibility offered.
2. “Only High Credit Scores Qualify”
Lenders accept credit scores as low as 600—you don’t need perfect credit.
3. “This Loan is Only for Primary Homes”
Bank Statement Loans can be used for primary residences, second homes, and investment properties.
How to Apply for a Bank Statement Loan
Follow these steps to get started:
Gather Your Bank Statements – Have at least 12–24 months of consistent deposits.
Review Your Credit Score – Higher scores help secure better terms.
Prepare a Down Payment – Expect to put down 10%-20%.
Find a Specialized Lender – Not all lenders offer Bank Statement Loans.
Submit Your Application – The lender will review your statements, credit, and reserves.
Is a Bank Statement Loan Right for You?
If you’re self-employed and facing challenges with traditional mortgage qualification, a Bank Statement Loan may be your best path to homeownership.
Ask yourself:
Do I have strong, consistent cash flow?
Can I provide 12–24 months of bank statements?
Do I have at least a 10% down payment?
If the answer is yes, this could be the mortgage solution you need.
Work With an Expert
Not all lenders offer Bank Statement Loans, and working with an experienced mortgage broker ensures you find the best options.
At Your Next Lender, we specialize in helping self-employed borrowers secure mortgages with flexible income verification. We work with 150+ lenders to find the best rates and terms.
Want to Learn More? Visit YourNextLender.com and schedule a free consultation to see if a Bank Statement Loan is right for you.
