What is a Bank Statement Loan?
A Bank Statement Loan
is a Non-QM mortgage designed for self-employed borrowers who can demonstrate consistent deposits but may not have traditional tax documentation. Lenders review personal or business bank statements instead of tax returns to determine income eligibility.
Why Use a Bank Statement Mortgage Loan?
If you're self-employed or a business owner and struggling to qualify for a mortgage due to low taxable income, a Bank Statement Loan is the perfect solution. Instead of using W-2s or tax returns, lenders calculate income based on 12 or 24 months of bank statements, making it easier for entrepreneurs, freelancers, and independent contractors to secure home financing.
Traditional Mortgage Lenders
- Use 100% of personal bank statement deposits.
- Count 50% to 80% of business bank statement deposits (after expense deductions).
- Non QM Lenders analyze
12 or 24 months of bank statements to calculate
qualifying income rather than using your tax returns.
Bank Statement Loans vs. Traditional Mortgages
| Loan Feature | Bank Statement | Traditional Loan |
|---|---|---|
| Income Verification |
Bank Statements 12-24 months |
W-2s, Tax Returns |
| Best For |
Self Employed Borrowers |
W-2 Employees |
| Max Loan Amount |
Up to $3,000,000 |
Yearly Conforming Limits |
| Down Payment |
10-20% |
3-20% |
| DTI Ratio |
Up to 50% |
Max 43% |
Bank Statement Loan Details
| Bank Statement Loan Criteria | Requirement |
|---|---|
| Credit Score |
680 |
| Income Varification |
Bank Statements 12-24 months +Asset Depletion |
| Minimum Loan Amount |
$200,000 |
| Maximum Loan Amount |
$1,000,000 |
| Max LTV |
Purchase 85%, Cash Out Unlimited |
| DTI Ratio |
Up to 50% |
| Occupancy |
Primary, Second Home, or Investment Property |
| Property Types |
Single Family, Multi Family, Condos, Townhomes |
Using Bank Statements For Mortgage Approval
Designed for Self-Employed Borrowers
Unlike traditional loans, Bank Statement Mortgages cater to:
- Small business owners
- Freelancers & independent contractors
- Real estate investors
- Commission-based earners
Who Might Qualify for a Bank Statement Loan?
- Self-employed for at least 2 years
- Minimum FICO Score: 680+
- Reserves required: 3-12 months (varies by loan amount)
- Max Loan-to-Value (LTV): 90% .
How to Qualify for a Bank Statement Loan
Collect Your Bank Statements
Submit 12 to 24 months of personal or business bank statements to confirm income stability.
Select the Appropriate Loan Program
Choose between 12-month or 24-month bank statement options according to the strength of your income. Target a credit score of 660 or higher, ensure you have 3 to 12 months of reserves.
Can I Use Personal & Business Bank Statements?
Yes! Personal bank statements count 100% of deposits, while business bank statements account for 50-80% after expense deductions. A common sense approach is used when looking at bank statements which allows for more flexible allowable income.
What Are the Reserve Requirements?
Reserve requirements vary:
- $200K - $500K loan: 3 months reserves
- $500K - $1M loan: 6 months reserves
- $1M+ loan: 12 months reserves
Frequently Asked Bank Statement Loan Questions-FAQ
Informational and Educational Resources Provided by West Coast Mortgage Group NMLS 5084