Bank Statement Loans: Requirements, 12 vs 24 Months & How to Qualify
How a bank statement loan works
Instead of reading the net income on your Schedule C or business return, the lender reviews your actual deposits. The steps are usually:
- Collect statements: 12 or 24 consecutive months of business or personal bank statements, all pages.
- Remove ineligible deposits such as transfers between your own accounts, loan proceeds, refunds and unexplained large deposits.
- Apply an expense factor to business-account deposits, or use a CPA or tax preparer letter showing your actual expense ratio.
- Average the result over the statement period to get monthly qualifying income.
- Calculate your debt-to-income ratio using that income, your new housing payment and your other debts.
The federal ability-to-repay rule still applies. Bank statements are simply the evidence the lender uses to confirm you can afford the payment.
12-month vs 24-month bank statement loans
| 12-month program | 24-month program | |
|---|---|---|
| Statements needed | Most recent 12 months | Most recent 24 months |
| Good for | Businesses whose income grew recently | Businesses with steady income over two years |
| Pricing | Sometimes slightly higher | Sometimes slightly better |
| Watch out for | One slow month has a bigger effect | An older slow year pulls the average down |
Many borrowers run both calculations and choose whichever supports the loan they need at the best terms. If your income jumped this year, the 12-month program may show a higher average; if last year was your best, the 24-month program could be stronger.
Business vs personal bank statements
| Business statements | Personal statements | |
|---|---|---|
| Typical treatment | Deposits reduced by an expense factor (or CPA-verified expense ratio) | Deposits often counted at a higher share, since business expenses were already paid |
| Best when | Revenue flows through a business account | You pay yourself regular draws into a personal account |
| Extra documents | Proof of business ownership and percentage owned | Sometimes a few months of business statements to show the business supports the draws |
Bank statement income example
Simplified hypothetical example; each lender's calculation differs.
| 24 months of eligible business deposits | $600,000 |
| Expense factor (example 50%) | − $300,000 |
| Qualifying income over 24 months | $300,000 |
| Monthly qualifying income | $12,500 |
| Same deposits with a CPA letter showing a 30% expense ratio | $17,500/mo |
That difference is why lender choice matters: the same deposits can support very different loan amounts depending on how expenses are calculated. As a broker, we can review your statements against several lenders' methods, including default expense factors, CPA-verified ratios and personal-account treatment, and show you which approach supports the purchase price or cash-out amount you're aiming for. Some lenders also use industry-specific expense factors, which can help businesses with naturally low overhead such as consultants or service providers.
Bank statement loan requirements
| Requirement | What to expect (varies by lender) |
|---|---|
| Self-employment history | Often 2 years; some lenders accept 1 year with prior experience in the same field |
| Ownership | Commonly 25% or more of the business to use business statements |
| Credit score | Lender minimums vary; programs are generally strongest for scores of 640 and up, with better pricing higher |
| Down payment | Frequently 10% or more on purchases; higher for investment properties or lower scores |
| Reserves | Several months of payments in savings after closing |
| Business verification | License, CPA or tax preparer letter, or other proof the business is active |
| NSFs and overdrafts | Frequent insufficient-funds items can be a problem; lenders review account conduct |
Who uses bank statement loans
Bank statement loans are designed for people whose income is real and consistent but doesn't show up fully on a tax return. Common borrowers include:
- Small-business owners such as restaurant owners, retailers, salon and spa owners, and e-commerce sellers.
- Contractors and tradespeople: builders, electricians, plumbers and landscapers who write off trucks, tools and materials.
- Professionals in private practice, including dentists, chiropractors, therapists and consultants.
- Commission earners, like real estate and insurance agents, who may also qualify with a 1099 program.
- Gig and creator income with a steady deposit history.
What affects bank statement loan pricing
Rates on bank statement loans are set by each lender and change with the market. The factors that most often move your pricing are:
- Credit score: higher scores typically unlock lower rates and higher loan-to-value.
- Down payment or equity: more skin in the game usually means better terms.
- Property type and occupancy: primary homes price better than investment properties.
- Statement period: 12- versus 24-month programs can price differently.
- Reserves: extra months of savings can offset other risk factors.
- Loan size: very small and very large loans may price differently.
Common reasons bank statement loans get declined
- Too many overdrafts or NSF items in the statement period.
- Declining deposits, where recent months are much lower than earlier months.
- Unexplained large deposits that can't be sourced.
- Mixed business and personal activity that makes income hard to separate.
- Not enough reserves after the down payment and closing costs.
- Short business history without prior experience in the same field.
Many of these can be fixed with preparation, and a different lender may view the same file differently, which is another reason to compare.
What you can do with a bank statement loan
- Buy a primary home without submitting tax returns.
- Buy a second home or investment property. For rentals, a DSCR loan that qualifies on rent may be simpler.
- Refinance to a new rate or term.
- Cash-out refinance to access equity, usually at a lower maximum loan-to-value than a purchase.
Bank statement loans for second homes and investment properties
Bank statement programs aren't limited to your primary residence. Many lenders also finance second homes and investment properties using the same deposit-based income calculation. Expect a larger down payment and more reserves than for a primary home, and possibly a prepayment penalty on investment properties. If the property is a rental that already produces enough income to cover its payment, compare a DSCR loan too. It may skip personal income entirely.
Bank statement loan vs refinancing later
Many self-employed borrowers use a bank statement loan to buy now rather than waiting years for their tax returns to catch up. If your business grows and your returns later support a conventional loan, refinancing can lower your rate. Before you close, ask whether the loan has a prepayment penalty and how long it lasts, so you know when refinancing would make sense.
Timing around tax season
If you plan to buy in the next year or two, talk with your tax preparer and a loan officer before filing. Aggressive deductions lower taxable income, which can limit full-documentation options, while a bank statement loan looks at deposits instead. Knowing which path you'll use helps you make informed decisions about both taxes and financing.
Bank statement loan pros and cons
| Pros | Cons |
|---|---|
| Qualify on real cash flow | Higher rates than conventional loans |
| No tax returns on most programs | Larger down payment usually required |
| Primary, second home and investment options | Reserves required |
| 12- or 24-month options | Irregular deposits need explanations |
How to prepare your statements
- Download complete statements (all pages, including blank ones) directly from your bank.
- Separate business and personal activity as much as possible.
- Document large deposits: invoices, contracts or payout reports.
- Avoid moving money between accounts in ways that look like income.
- Limit overdrafts in the months before applying.
- Keep deposits consistent between applying and closing. Lenders may ask for updated statements before closing, and a sudden drop can raise questions.
- Note seasonal patterns. If your business is seasonal, a 24-month program usually smooths out slow months better than a 12-month one.
- Ask your CPA for an expense-ratio letter if your actual expenses are lower than a lender's default factor.
Bank statement loan vs other self-employed options
| Option | Uses | When it's better |
|---|---|---|
| Bank statement loan | Deposits | Strong deposits, low taxable income |
| 1099 loan | 1099 forms | Contractors with steady 1099 pay |
| P&L loan | CPA-prepared profit and loss | Clear financials, irregular deposits |
| Full-doc conventional | Tax returns | Returns already show enough income; usually the lowest rate |
| DSCR loan | Property rent | Investment properties |
See all of these side by side on our self-employed mortgage lenders page.
How to get a bank statement loan
- Gather 12 and 24 months of statements so both calculations can be run.
- Check your credit at AnnualCreditReport.com.
- Get a qualifying-income estimate across several lenders.
- Get preapproved before making offers, so sellers see your financing is ready.
- Close on your home, then consider refinancing into a conventional loan later if your tax returns grow to support it.
Frequently asked questions
What is a bank statement loan?
A bank statement loan is a mortgage for self-employed borrowers that verifies income using 12 or 24 months of bank statements instead of tax returns.
How is income calculated on a bank statement loan?
Lenders total eligible deposits, subtract an expense factor for business accounts (or use your CPA-verified expense ratio), and average the result into monthly income.
What credit score do I need for a bank statement loan?
It depends on the lender. Bank statement programs are generally strongest for scores of 640 and higher, with better rates and higher loan-to-value at stronger scores.
How much down payment is required?
Commonly 10% or more for a primary home purchase, and more for investment properties or lower credit scores. Requirements vary by lender.
Can I use personal bank statements?
Yes. Many lenders accept personal statements, often counting a higher share of deposits than business statements. Some also ask for business statements to confirm the business supports your draws.
Is a 12-month or 24-month bank statement loan better?
Neither is always better. A 12-month program helps if income has grown recently; a 24-month program may offer slightly better pricing for steady businesses. Running both shows which works for you.
Can I do a cash-out refinance with a bank statement loan?
Yes. Many lenders offer bank statement cash-out refinances, typically with a lower maximum loan-to-value than purchases.
How long does a bank statement loan take to close?
Often three to six weeks, depending on how quickly statements are reviewed, the appraisal and title. Complete, well-organized statements speed things up.
Do I need a CPA letter for a bank statement loan?
Not always. Many lenders use a standard expense factor. A CPA or tax preparer letter can help by confirming your business ownership or a lower actual expense ratio, which may increase qualifying income.
Can I get a bank statement loan with one year of self-employment?
Some lenders allow one year of self-employment if you worked in the same field before going out on your own. Two years is more common.
Can I combine bank statement income with W-2 income?
Often yes. If you or a co-borrower have W-2 income, it can usually be documented traditionally and added to the bank statement income.
Are bank statement loans legitimate?
Yes. They're non-QM mortgages offered by established lenders and still require the lender to verify your ability to repay, just with different documents.
Related guides and tools
Sources
- Consumer Financial Protection Bureau: Regulation Z § 1026.43, ability-to-repay requirements
- Internal Revenue Service: Self-Employed Individuals Tax Center