Updated October 2026 by Texas Made Mortgage, Frisco, TX.
Quick answer: A bank statement loan qualifies a self-employed borrower on deposits instead of tax returns. The lender totals eligible deposits over 12 or 24 months, removes transfers and one-time items, applies an expense factor to business accounts (commonly 50%, lower with a CPA letter or for low-overhead businesses), and divides by the months to get a monthly qualifying income. Example: $600,000 in business deposits over 12 months with a 50% expense factor equals $300,000 net, or $25,000 a month of qualifying income, even if the tax return showed far less after write-offs. Rates and down payments run higher than conforming loans, and most programs want about two years of self-employment.
Which deposits count?
Counted: customer payments, card processor settlements, invoices paid, regular income from the business.
Not counted: transfers between your own accounts, loan proceeds, tax refunds, large one-time deposits without an explanation, and deposits from sources that do not recur.
Flagged: a deposit far above the normal pattern (an underwriter typically questions anything over 50% to 100% of the monthly average), returned items and overdrafts.
Personal statements or business statements?
Personal statements are simpler: deposits from the business into your personal account are usually counted at 100%, because the money has already cleared business expenses. Business statements show gross revenue, so the lender applies an expense factor to estimate what is left after costs. The choice depends on how you run the business. A consultant who pays themselves a steady draw often qualifies higher on personal statements; a retailer with big gross and thin margins may do better with a CPA-documented expense ratio on business statements.
What is an expense factor?
The lender's estimate of the share of deposits consumed by business expenses. Common defaults are 50% for most businesses, 20% to 30% for service businesses with few employees and no inventory, and higher for businesses with cost of goods. A CPA or licensed tax preparer can write a letter stating the actual expense ratio, and many programs accept a ratio as low as 10% to 20% with that letter. The factor is the single biggest lever in the calculation.
What does a full worked example look like?
A Frisco general contractor, in business six years, with 12 months of business bank statements:
Total deposits: $680,000.
Remove transfers from savings ($50,000) and an equipment loan deposit ($30,000): $600,000 eligible deposits.
Expense factor 50% (no CPA letter): $300,000 net.
Divide by 12: $25,000 a month qualifying income.
With a CPA letter stating a 35% expense ratio instead: $390,000 net, $32,500 a month.
The same contractor's tax return, after depreciation and write-offs, showed $92,000 of net income, about $7,700 a month. On a conforming loan that is the number. On a bank statement loan it is $25,000 or more.
What are the trade-offs?
Down payment: typically 10% to 20% or more depending on credit and the program.
Rate: somewhat higher than conforming, reflecting the documentation.
Reserves: often several months of payments after closing.
History: most programs want two years self-employed, with exceptions for prior experience in the same field.
Credit: stronger scores unlock lower down payments and better pricing.
Many borrowers use a bank statement loan to buy now and refinance into conventional once two years of returns support it.
What should you clean up before applying?
Run all business income through one account for at least 12 months.
Stop mixing personal transfers into the business account.
Avoid NSFs and overdrafts; a pattern of them can disqualify the file.
Get the CPA letter early if your expenses are lower than the default factor.
Keep statements complete, all pages, including blank ones.
Frequently asked questions
Can I use 24 months instead of 12?
Yes. Twenty-four months smooths a slow year and some programs price it better.
Do bank statement loans work for refinances and rentals?
Yes, including cash-out on investment property. For rentals, also compare a DSCR loan, which ignores your income entirely.
Is this the same as a stated-income loan?
No. Every deposit is verified; the method of proving income is different, not the standard.
Want us to run your deposits before you commit to anything? Send 12 months of statements and a loan officer at Texas Made Mortgage will tell you the income you qualify with. Call 817-567-8014.
Texas Made Mortgage, NMLS #2676326. This article is general education, not a commitment to lend or an offer of credit. Non-QM programs have different rates, terms, down payment and reserve requirements than conforming loans, vary by lender and are subject to change; not all applicants will qualify. All loans subject to credit approval. Equal Housing Opportunity.
