How Self-Employed Business Owners Can Get a Mortgage Without Tax Returns
Getting a mortgage as a self-employed business owner can feel impossible. Traditional lenders look at tax returns, W-2s, and pay stubs—documents that don’t accurately reflect your real income if you write off expenses. The good news? A Bank Statement Loan is a solution that helps self-employed borrowers qualify based on their actual cash flow.
What Is a Bank Statement Loan?
A Bank Statement Loan is an alternative mortgage that allows self-employed individuals, freelancers, and business owners to use 12 to 24 months of bank statements to prove income instead of tax returns. This option is perfect for borrowers whose adjusted gross income (AGI) appears low due to tax write-offs but who actually have strong earnings.
Why Traditional Mortgages Don’t Work for Self-Employed Borrowers
If you’re self-employed, a conventional loan requires you to show tax returns that don’t always tell the full story of your income. Here’s why many business owners struggle with traditional mortgage applications:
Tax Deductions Reduce Taxable Income – Business owners write off expenses to lower their tax burden, making their income look lower than it really is.
Inconsistent Monthly Earnings – Your income may vary month to month, making it harder to fit the standard lending model.
Strict Debt-to-Income (DTI) Ratios – Conventional loans use tax return income to calculate DTI, often making self-employed borrowers look overleveraged.
With a Bank Statement Loan, none of this matters—your actual bank deposits determine your qualifying income.
How Bank Statement Loans Work
Lenders analyze personal or business bank statements from the last 12–24 months to determine your average monthly income. The key steps include:
Submit Bank Statements – Provide your most recent 12 to 24 months of business or personal bank statements.
Income Calculation – If using personal statements, 100% of deposits count as income. If using business statements, a lender applies an expense ratio (typically 10%-50%) to account for operating costs.
Loan Approval Based on Deposits – Instead of tax returns, lenders base approval on consistent deposits into your account.
Who Qualifies for a Bank Statement Loan?
Self-employed borrowers who struggle to qualify for a traditional mortgage can benefit from a Bank Statement Loan, including:
Small business owners (LLCs, S-corps, sole proprietors)
Freelancers and independent contractors
Real estate investors
Consultants, coaches, and gig workers
Medical professionals and attorneys with private practices
Key Benefits of a Bank Statement Loan
1. No Tax Returns Needed
Lenders don’t ask for tax returns, W-2s, or pay stubs. Instead, they verify your income based on your bank deposits.
2. Higher Loan Amounts
Since approval is based on cash flow, you can often qualify for a larger loan amount than with a traditional mortgage.
3. Flexible Debt-to-Income Ratios
Lenders understand that self-employed income fluctuates, so they offer more flexible DTI requirements.
4. Can Be Used for Primary, Second Homes, or Investment Properties
You can use a Bank Statement Loan to purchase a home, a vacation property, or even an investment property.
Requirements for a Bank Statement Loan
While lender requirements vary, here are the typical qualifications:
Credit Score – Minimum 600+ (higher scores get better rates)
Down Payment – 10%-20% down depending on credit profile
Self-Employment History – At least 2 years of self-employment
Loan Amounts – Available for loans up to $10 million
Debt-to-Income Ratio – Up to 50% accepted
Reserves – Some lenders require 3-6 months of cash reserves
Interest Rates: How Do They Compare?
Bank Statement Loans usually have higher interest rates than traditional loans, but the difference isn’t extreme. Your rate depends on:
Credit score
Down payment amount
Loan term (15, 30 years, etc.)
Loan-to-value (LTV) ratio
Since self-employed borrowers often can’t qualify for conventional financing, the trade-off is a slightly higher rate in exchange for getting approved without tax returns.
Myths About Bank Statement Loans
1. “These Loans Have Ridiculously High Interest Rates”
Not true. Rates are slightly higher than traditional loans, but they are competitive and reflect the risk lenders take by not requiring tax returns.
2. “I Need a Perfect Credit Score”
You don’t need an 800 credit score. Many lenders approve scores as low as 600, though better scores lead to better rates.
3. “I Can Only Use This for a Primary Residence”
You can use a Bank Statement Loan to finance primary residences, second homes, or investment properties.
How to Apply for a Bank Statement Loan
Getting started is easy. Follow these steps:
Check Your Bank Statements – Ensure you have at least 12–24 months of consistent deposits.
Review Your Credit Score – The higher your score, the better your loan terms.
Prepare a Down Payment – Expect to put down at least 10%-20%.
Find a Lender That Offers Bank Statement Loans – Not all lenders do, so work with a broker who has access to multiple options.
Submit Your Application – Once your statements, credit, and assets are reviewed, lenders determine your loan eligibility.
Is a Bank Statement Loan Right for You?
If you’re self-employed and struggling to qualify for a mortgage due to tax write-offs, a Bank Statement Loan offers a real solution. 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 you answered yes, a Bank Statement Loan could help you buy a home without the frustration of traditional loan requirements.
Work With a Mortgage Broker Who Specializes in Self-Employed Loans
Not every lender offers Bank Statement Loans, and those that do have varying guidelines. Working with an experienced mortgage broker ensures you find the best deal with the lowest rates and best terms.
At Your Next Lender, we help self-employed borrowers qualify for Bank Statement Loans and other flexible mortgage solutions. With access to 150+ lenders, we get you the best financing options available.
Want to See What You Qualify For? Get started today! Visit YourNextLender.com and schedule a consultation to see how a Bank Statement Loan can work for you.
