Bank Statement Loans
If you’re self-employed, you already know the struggle of getting a traditional mortgage. Your business is thriving, your cash flow is strong, and you can easily afford the home you want—yet, banks keep shutting the door in your face. Why? Because your tax returns don’t show enough income.
That’s where a Bank Statement Loan comes in. If you’ve been denied a mortgage because your tax write-offs make your income look lower than it really is, this could be your solution.
What Is a Bank Statement Loan?
A Bank Statement Loan is a mortgage designed specifically for self-employed individuals, freelancers, and small business owners who can’t qualify for a traditional home loan due to how their income appears on tax returns. Instead of tax returns and W-2s, lenders use your bank statements (typically from the last 12 to 24 months) to verify your income.
How Does a Bank Statement Loan Work?
Instead of focusing on your taxable income, lenders look at the actual deposits in your business or personal bank account. Here’s how it typically works:
Choose Your Bank Statements – You provide 12 to 24 months of bank statements, either personal or business, to prove income consistency.
Calculate Your Income – Lenders review your total deposits and apply an expense ratio (if using business statements) to determine your qualifying income.
Skip Tax Returns – No need to provide W-2s, tax returns, or traditional proof of income.
Get Qualified Based on Cash Flow – If your statements show strong, consistent deposits, you’re in a great position for approval.
Who Can Benefit from a Bank Statement Loan?
These loans are specifically designed for self-employed individuals, including:
Small business owners (LLC, S-Corp, sole proprietors)
Freelancers and independent contractors
Gig workers (Uber drivers, consultants, creatives)
Real estate investors
Doctors, lawyers, and other professionals who own their own practice
If your taxable income doesn’t reflect your true earning potential, a Bank Statement Loan allows you to qualify based on real cash flow instead of tax-reduced income.
Benefits of a Bank Statement Loan
Traditional mortgage lenders often require two years of W-2s and tax returns, making it nearly impossible for self-employed borrowers to qualify. Here’s why a Bank Statement Loan is a game-changer:
No Tax Returns Required – Your income is verified using bank deposits instead of tax documents.
Higher Loan Amounts – Because income is based on actual deposits, you might qualify for more than a traditional loan would allow.
Flexible Debt-to-Income Ratios – Lenders are more lenient with DTI requirements since they understand self-employed income varies.
Use Business or Personal Accounts – You can use either business bank statements (with an expense ratio) or personal bank statements (100% of deposits count as income).
Available for Primary, Second Homes, or Investment Properties – Unlike some other non-traditional loans, you can use Bank Statement Loans for multiple property types.
How Do Lenders Calculate Your Income?
If you’re self-employed, your tax return might show a low adjusted gross income (AGI) due to write-offs. Lenders look past that by using your actual deposits. Here’s how they typically calculate your income:
Using Personal Bank Statements – 100% of qualifying deposits count as income.
Using Business Bank Statements – Lenders apply an expense ratio, often between 10%–50%, depending on your industry.
For example, if your business account shows $20,000 in monthly deposits and the lender applies a 30% expense ratio, they count $14,000/month as your qualifying income ($20,000 - $6,000 in assumed expenses).
Requirements for a Bank Statement Loan
While requirements vary by lender, most Bank Statement Loans have these general guidelines:
12–24 months of bank statements
Credit score of 600+ (higher scores get better rates)
At least 2 years of self-employment history
Down payment of 10%–20% (varies by lender and credit score)
Loan amounts up to $10 million (great for high-income earners)
DTI up to 50%
Interest Rates and Terms
Because Bank Statement Loans carry more risk for lenders, they often come with slightly higher rates than traditional mortgages. However, rates are still competitive and depend on factors like:
Credit score
Loan-to-value ratio
Loan amount
Cash reserves
Common Myths About Bank Statement Loans
1. “The Interest Rates Are Too High”
While these loans have higher rates than conventional loans, they aren’t unreasonable. Plus, they offer self-employed borrowers access to home financing that they wouldn’t otherwise qualify for.
2. “I Need a Perfect Credit Score”
Nope. Most lenders accept scores as low as 600, though better scores help with lower rates.
3. “I Can’t Use This for an Investment Property”
You can use a Bank Statement Loan for primary residences, vacation homes, and investment properties.
How to Apply for a Bank Statement Loan
Getting a Bank Statement Loan is straightforward if you meet the requirements. Here’s what you’ll need to do:
Gather Your Bank Statements – 12 or 24 months of personal or business bank statements.
Check Your Credit Score – A higher score helps with better rates and lower down payments.
Prepare a Larger Down Payment – Expect to put down 10%–20% depending on your profile.
Find a Lender Who Specializes in Bank Statement Loans – Not every lender offers them, so work with a mortgage broker (like Your Next Lender) who has access to multiple options.
Submit Your Application – The lender will verify your income, DTI, and credit before making an offer.
Is a Bank Statement Loan Right for You?
If you’re self-employed and have been turned away by banks despite having strong cash flow, a Bank Statement Loan could be the best option for securing a mortgage.
Do you have good cash flow but low reported income on tax returns?
Can you provide 12–24 months of bank statements?
Do you have at least a 10% down payment?
If you answered yes, a Bank Statement Loan could be the perfect solution to get the home financing you need without the traditional hurdles.
Work With an Expert
Not all lenders offer Bank Statement Loans, and the ones that do often have very different qualification criteria. That’s why working with an experienced mortgage broker—someone who understands self-employed borrowers—is key to getting the best deal.
At Your Next Lender, we specialize in helping self-employed business owners get into homes with Bank Statement Loans and other alternative financing solutions. We work with 150+ lenders, cutting out the middleman to get you better rates and lower fees.
If you’re tired of hearing “no” from traditional banks, let’s talk about how we can say “yes” to your mortgage needs.
Ready to See What You Qualify For? Schedule a free consultation today and see how a Bank Statement Loan can help you get the mortgage you deserve.
