A Bank Statement Loan is a mortgage program designed for self-employed borrowers who may not qualify for a traditional loan because their tax returns show low net income due to business write-offs.
Instead of relying on W-2s or tax returns, the lender uses your personal or business bank statements—typically covering the last 12 to 24 months—to calculate your qualifying income based on actual deposits.
Key characteristics:
- No tax returns required – Income is verified through bank deposits.
- Personal or business statements accepted – Lenders often use 100% of personal deposits or a percentage of business deposits (after applying an expense factor).
- Flexible income calculation – Can average monthly deposits to determine consistent income.
- Higher down payment – Often 10–20% minimum.
- Available for purchase or refinance – Can be used for primary, second homes, or investment properties.
Why it’s beneficial:
- Qualifies based on real revenue – Perfect for self-employed borrowers whose taxable income looks low because of deductions.
- No need to amend tax returns – Avoids the hassle and potential IRS scrutiny.
- More buying power – Higher calculated income can mean qualifying for a larger loan.
- Flexibility in employment type – Works for business owners, freelancers, independent contractors, and gig workers.
- Entrepreneur-friendly lending – Recognizes cash flow rather than punishing legitimate business write-offs.