Yes, you can get a mortgage using only bank statements instead of tax returns. A bank statement loan is designed specifically for self-employed borrowers, business owners, and independent contractors who have strong cash flow but show lower taxable income due to legitimate business deductions.
If you write off business expenses on your taxes, you know the problem. The IRS sees your adjusted gross income. A traditional mortgage lender sees the same number. But your actual monthly deposits tell a completely different story.
Bank statement loans solve this disconnect by using your real deposits as proof of income rather than tax returns that understate your true earning capacity.
What Is a Bank Statement Loan?
A bank statement loan is a type of non-QM (non-qualified mortgage) loan that allows borrowers to qualify using 12 to 24 months of bank statements instead of W-2s, pay stubs, or tax returns.
These loans exist because traditional mortgage underwriting doesn't work for everyone. Conventional lenders require tax returns that show consistent W-2 income. But self-employed borrowers often show lower taxable income because they take advantage of legitimate tax deductions for:
- Home office expenses
- Vehicle and travel costs
- Equipment and supplies
- Health insurance premiums
- Retirement contributions
- Professional services and contractors
The result? A successful business owner making $15,000 per month in deposits might show only $6,000 per month on their tax return after deductions. Traditional lenders would qualify them based on that $6,000 figure, severely limiting their buying power.
Bank statement loans look at the actual money flowing into your accounts, giving you credit for your true cash flow.
How Bank Statement Loans Work
12-Month vs 24-Month Programs
Lenders offer two main options for bank statement documentation:
12-Month Bank Statement Programs
- Requires statements from the most recent 12 consecutive months
- Typically carries slightly higher interest rates
- Faster to gather documentation
- Best for borrowers with consistent recent income
24-Month Bank Statement Programs
- Requires statements from the most recent 24 consecutive months
- Usually offers better interest rates (0.25-0.50% lower)
- More documentation to compile
- Better for borrowers who want the lowest possible rate
- Shows lenders a longer track record of stability
Most borrowers choose the 12-month option for convenience, but if your income has been stable for two years, the 24-month program can save you thousands over the life of your loan.
Income Calculation Methods
How lenders calculate your qualifying income depends on which bank accounts you use:
Personal Bank Accounts: Gross Deposits Method
For personal accounts, lenders typically add up all deposits over 12 or 24 months and divide by the number of months. Large non-recurring deposits (like a one-time insurance payout or gift) may be excluded.
Example: $180,000 in total deposits over 12 months = $15,000/month qualifying income
Business Bank Accounts: Expense Factor Method
For business accounts, lenders apply an expense factor to account for business costs. This factor typically ranges from 50% to 70%, depending on your industry and documentation.
Example with 50% expense factor: $300,000 in deposits over 12 months = $25,000/month gross. After 50% expense factor = $12,500/month qualifying income.
Some lenders allow you to provide a CPA-prepared profit and loss statement to justify a lower expense factor (meaning more of your deposits count as income).
Who Qualifies for Bank Statement Loans?
Bank statement loans serve borrowers who have income that's difficult to document through traditional means:
Self-Employed Professionals
- Consultants and coaches
- Doctors, lawyers, and accountants with private practices
- Creative professionals (designers, writers, photographers)
Business Owners
- S-Corporation and LLC owners
- Sole proprietors
- Partnership members
- Franchise owners
Contract and Commission Workers
- 1099 independent contractors
- Real estate agents and brokers
- Insurance agents
- Sales professionals with variable commission income
- Rideshare and delivery drivers
Gig Economy Workers
- Freelancers with multiple income streams
- Content creators
- E-commerce sellers
The common thread is income that doesn't fit neatly into a W-2 box but shows up consistently in bank deposits.
Qualification Requirements
Credit Score Requirements
Bank statement loans use risk-based pricing, meaning your credit score directly affects your rate and terms:
| Credit Score | Typical Impact |
|---|---|
| 720+ | Best rates and terms available |
| 680-719 | Competitive rates, most options available |
| 660-679 | Moderate rate premium, still many options |
| 620-659 | Higher rates, larger down payment may be required |
Most lenders require a minimum credit score of 620 to 680 for bank statement loans. Higher scores unlock better rates and lower down payment options.
Down Payment Requirements
Expect to put down 10% to 20% for a bank statement loan:
- 10% down: Available for borrowers with 700+ credit scores
- 15% down: Common minimum for scores in the 660-699 range
- 20% down: May be required for lower credit scores or higher loan amounts
Reserve Requirements
Lenders typically require 6 to 12 months of reserves in liquid assets after closing. Reserves include:
- Checking and savings accounts
- Investment accounts (stocks, bonds, mutual funds)
- Retirement accounts (counted at 60-70% of value)
Self-Employment History
You'll need to demonstrate at least 2 years of self-employment history in the same field or industry. This can be verified through:
- Business license
- CPA letter
- Business bank account history
- Professional licensing records
California-Specific Considerations
California borrowers should know that bank statement loans work well for the state's high home prices and large self-employed population. However:
- California's high loan amounts may require jumbo bank statement programs
- Some coastal markets may have additional property requirements
- California Department of Real Estate licensing applies to all mortgage brokers
Documentation Checklist
Here's what you'll need to apply for a bank statement loan:
Required Documents
- 12 or 24 months of consecutive bank statements (all pages)
- Business license or proof of self-employment
- Two years of self-employment verification
- Valid government-issued ID
- Social Security card
- Signed authorization for credit report
Supporting Documents (May Be Required)
- CPA-prepared profit and loss statement
- Business formation documents (LLC operating agreement, articles of incorporation)
- Professional license (if applicable)
- Asset statements for reserves
Property Documents
- Purchase contract (for purchases)
- Current mortgage statement (for refinances)
- Property insurance quote
- Title commitment
Bank Statement Loan vs Traditional Mortgage: A Comparison
| Feature | Bank Statement Loan | Traditional Mortgage |
|---|---|---|
| Income Documentation | 12-24 months bank statements | W-2s, tax returns, pay stubs |
| Minimum Credit Score | 620-680 | 620 |
| Down Payment | 10-20% | 3-20% |
| Interest Rate | 0.75-2% higher than conventional | Standard market rates |
| Income Calculation | Deposits or expense factor | Gross income from tax returns |
| Self-Employment | 2 years required | 2 years required |
| Reserves Required | 6-12 months | 2-6 months |
| Loan Limits | Up to $3-5 million | Conforming limits apply |
| Processing Time | 30-45 days | 30-45 days |
The Cost of a Bank Statement Loan
Bank statement loans typically carry interest rates that are 0.75% to 2% higher than conventional loans. This premium reflects the additional risk lenders take when they can't verify income through traditional tax documentation.
What does this mean in real dollars?
On a $500,000 loan:
- Conventional rate at 7.00% = $3,327/month principal and interest
- Bank statement rate at 8.00% = $3,669/month principal and interest
- Difference = $342/month or $4,104/year
When the premium makes sense:
Despite the higher rate, a bank statement loan often makes sense when:
-
Your tax returns would qualify you for much less. If tax returns show $5,000/month but bank deposits show $12,000/month, the bank statement loan gives you far more buying power.
-
You plan to refinance later. After building equity and establishing more income history, you may refinance into a conventional loan.
-
The alternative is not buying. Renting while waiting for "perfect" documentation can cost more than the rate premium.
-
You're investing the difference. If the property appreciation and tax benefits exceed the rate premium, the math works in your favor.
Pros and Cons of Bank Statement Loans
Advantages
- No tax return requirement - Qualify on actual cash flow
- Higher loan amounts - Your full income counts, not just taxable income
- Flexible underwriting - Lenders understand self-employed income
- Multiple property types - Primary homes, second homes, and investment properties
- Available now - Don't wait years to build traditional income history
Disadvantages
- Higher interest rates - Expect to pay a premium
- Larger down payment - Typically 10-20% minimum
- More documentation - Every page of 12-24 months of statements
- Fewer lenders - Not all mortgage companies offer these programs
- Stricter reserves - Need more money in the bank after closing
Frequently Asked Questions
Can I use bank statements from multiple accounts?
Yes, most lenders allow you to combine statements from multiple accounts. You can use a combination of personal and business accounts. However, using business accounts typically triggers the expense factor calculation, which reduces the amount counted as income.
What is the minimum credit score for a bank statement loan?
Most bank statement loan programs require a minimum credit score of 620 to 680. Higher scores (700+) qualify for better rates and lower down payment requirements. Some lenders may go down to 600 for borrowers with significant compensating factors.
How do lenders handle irregular deposits?
Lenders expect some variation in self-employed income. They typically average your deposits over the full 12 or 24-month period. Large one-time deposits that aren't income-related (insurance settlements, gifts, loans) may be excluded from the calculation. Consistent monthly patterns help your application.
Are bank statement loans available for investment properties?
Yes, bank statement loans are available for investment properties, second homes, and primary residences. Investment property purchases may require higher down payments (typically 20-25%) and slightly higher rates compared to primary residence purchases.
Can I refinance my current mortgage with a bank statement loan?
Absolutely. Bank statement refinances work for rate-and-term refinances and cash-out refinances. Many self-employed borrowers use this option to access equity or consolidate debt when they can't qualify through traditional documentation.
What if I just started my business?
Most bank statement loan programs require 2 years of self-employment history. If you recently started your business, you may need to wait until you have this track record. Some lenders may accept less history if you have extensive experience in the same industry.
Take the Next Step
If you're self-employed, own a business, or earn income that doesn't fit the traditional W-2 mold, a bank statement loan could be your path to homeownership or refinancing.
The key is working with a lender who specializes in these programs and understands the nuances of self-employed income documentation.
Ready to see if you qualify? Apply now to speak with a loan officer who can review your bank statements and provide a personalized rate quote for your situation.
Last verified: January 2026. Bank statement loan programs, rates, and requirements vary by lender and are subject to change. Contact us for current program availability in California.