Bank Statement Loans
Home Financing Using Bank Deposits as Income Proof
Bank statement loans through Howell Mortgage Group allow self-employed borrowers to qualify for home financing using 12 to 24 months of personal or business bank statements instead of tax returns and W-2s. These non-QM loans are designed for freelancers, gig workers, business owners, and independent contractors whose tax returns understate their actual income due to legitimate business deductions.
What Is a Bank Statement Loan?
A bank statement loan is a non-QM (non-qualified mortgage) product that uses bank statements as the primary income documentation instead of traditional sources like tax returns, W-2s, or pay stubs. The lender analyzes 12 to 24 months of personal or business bank deposits to calculate the borrower’s qualifying income.
This loan type exists because self-employed individuals often show lower income on tax returns than they actually earn. Business write-offs, depreciation, and other legal deductions reduce taxable income, which makes it difficult to qualify for conventional financing where tax-return income is the benchmark.
By looking at actual bank deposits, lenders can see the true cash flow of the business and underwrite the loan accordingly. The lender typically applies an expense factor of 50% to personal bank statements or uses the actual deposits for business accounts, depending on the program.
Requirements and Qualifications
Bank Statements
Provide 12 or 24 months of consecutive personal or business bank statements. Lenders calculate average monthly deposits to determine qualifying income.
Self-Employment
You must be self-employed for at least two years. A CPA letter or business license confirming your self-employment status may be required.
Credit Score
Minimum scores range from 600 to 680 depending on the lender and down payment amount. Higher scores unlock better rates.
DTI Ratio
Maximum debt-to-income ratio of 43% to 50%, calculated using the bank-statement-derived income figure.
Down Payment
Typically 10% to 20% of the purchase price. Some programs allow as little as 10% down with a credit score of 700 or higher.
Reserves
Lenders typically require 3 to 12 months of mortgage payment reserves in liquid assets after closing.
How Bank Statement Loans Work
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Gather Your Statements
Collect 12 or 24 months of consecutive bank statements from your primary personal or business account. The lender will review total deposits to calculate income. -
Apply with Howell Mortgage Group
Submit your application along with bank statements, CPA letter or business license, credit authorization, and identification. -
Income Calculation
The lender totals all qualifying deposits, divides by the number of months, and applies an expense factor if using personal accounts. This produces your qualifying monthly income. -
Appraisal and Underwriting
A standard property appraisal determines home value. The underwriter verifies your calculated income, credit, reserves, and DTI ratio. -
Approval and Rate Lock
Once approved, lock in your interest rate and receive your commitment letter with final terms and conditions. -
Close Your Loan
Sign closing documents, fund the down payment and closing costs, and take possession of your new home or investment property.
Benefits of Bank Statement Loans
No Tax Returns Required
Eliminate the problem of qualifying based on artificially low tax-return income. Your actual business cash flow determines your borrowing power.
Competitive Rates
While slightly higher than conventional rates, bank statement loan pricing has become increasingly competitive as more lenders enter the non-QM market.
Flexible Documentation
Use personal or business bank statements, whichever shows stronger income. CPA letters and profit-and-loss statements can supplement the application.
Quick Approval
Without the complexity of analyzing multi-year tax returns, K-1s, and business entity structures, bank statement loans often process faster than conventional self-employed applications.
Multiple Property Types
Finance primary residences, second homes, and investment properties. Bank statement loans offer more property flexibility than many other non-QM programs.
Who Should Consider a Bank Statement Loan?
Bank statement loans are designed for self-employed professionals whose tax returns do not reflect their true income. If you are a business owner, freelancer, independent contractor, gig worker, or commission-based earner who uses legitimate tax deductions to minimize taxable income, this loan type bridges the gap between what you actually earn and what your tax return shows.
Common professions that benefit from bank statement loans include real estate agents, consultants, e-commerce sellers, rideshare and delivery drivers, restaurant and salon owners, construction contractors, and medical professionals operating their own practices.
If you have been denied a conventional mortgage because your tax-return income was too low despite healthy bank account activity, a bank statement loan may be the solution. Howell Mortgage Group evaluates your actual cash flow, not the bottom line of your 1040.
How Does This Compare?
Feature | Bank Statement Loan | Conventional | P&L Loan |
|---|---|---|---|
Best For | Self-employed with strong deposits | W-2 employees | Self-employed with CPA |
DTI Limit | 43-50% | 45% | 43-50% |
Down Payment | 10-20% | 3-20% | 10-20% |
Min Credit Score | 600-680 | 620 | 620-680 |
Self-Employment Required | Yes (2+ years) | No | Yes (2+ years) |
Income Documentation | 12-24 months bank statements | Tax returns + W-2s | CPA-prepared P&L |