A bank statement loan is a mortgage designed for self-employed borrowers, business owners, and entrepreneurs who may not have traditional W-2 income documentation. Instead of tax returns, lenders use your personal or business bank statements to verify income and calculate your ability to repay the loan.
This type of financing is ideal if you write off significant business expenses, show reduced taxable income, or simply don't want to use tax returns for qualification.
Why Choose a Bank Statement Loan?
Bank statement loans offer self-employed professionals a practical path to homeownership without the limitations of traditional mortgage underwriting. They recognize that your actual cash flow often looks very different from your reported taxable income.
No Tax Returns Required
The biggest advantage? You don't need to provide tax returns. If your business deductions reduce your taxable income significantly, a bank statement loan looks at your actual deposits—giving you a much clearer picture of your true earning power.
Realistic Income Calculation
Lenders calculate your income based on deposits into your bank accounts over a 12- or 24-month period. This approach captures the real cash flow of your business, not just what you report to the IRS after deductions.
Flexible Documentation
You can use personal bank statements, business bank statements, or a combination of both. This flexibility allows you to present the strongest possible financial picture based on how you manage your business finances.
Competitive Rates for Qualified Borrowers
While rates may be slightly higher than conventional loans, qualified borrowers with strong credit and healthy cash reserves can still secure competitive rates—especially when working with experienced lenders who specialize in these programs.
How Income Is Calculated
Understanding how lenders evaluate your bank statements is key to knowing whether this loan type makes sense for you.
Deposit Analysis Period
Lenders will review either 12 months or 24 months of bank statements, depending on the program and your financial profile. A 24-month analysis may offer better terms if your income is consistent and strong over time.
Income Calculation Methods
Most lenders use one of two approaches:
- Gross Deposit Method: Lenders calculate income based on total deposits, then subtract any non-income items like transfers or loan proceeds.
- Expense Factor Method: After calculating gross deposits, lenders apply an expense factor (typically 25-50%) to account for business costs. This method recognizes that not all deposits are profit.
The calculation method and expense factor depend on whether you're using personal or business accounts, as well as the specific loan program.
What Counts as Income
Acceptable deposits generally include:
- Customer payments and sales revenue
- Business income transfers to personal accounts
- 1099 contract payments
- Regular recurring deposits
Lenders will exclude large one-time deposits, loan proceeds, transfers between your own accounts, and other non-income items.
Who Benefits Most from Bank Statement Loans?
This financing option is purpose-built for specific types of borrowers who don't fit the traditional lending mold.
Business Owners
If you own an LLC, S-corp, or partnership and take significant business deductions, your tax returns likely understate your actual income. Bank statement loans focus on cash flow, not taxable income—making them ideal for established business owners.
Self-Employed Professionals
Freelancers, consultants, and independent contractors often have variable income and high write-offs. A bank statement loan offers a more accurate view of your financial strength than tax returns alone.
Real Estate Investors
Property investors often show reduced income due to depreciation and other real estate deductions. Bank statement loans allow you to qualify based on actual revenue without being penalized for smart tax planning.
Entrepreneurs with Growing Businesses
If you're reinvesting heavily in your business or experiencing rapid growth, your tax returns may not reflect your true financial position. Bank statement loans can help you qualify now instead of waiting for your tax returns to catch up.
Personal vs. Business Bank Statements
You have options when it comes to which accounts you use for qualification.
Personal Bank Statements
Using personal bank statements is often simpler and may result in a higher calculated income since lenders apply a lower expense factor (or none at all). This works well if you deposit business income directly into personal accounts or operate as a sole proprietor.
Business Bank Statements
If most of your revenue flows through business accounts, you can use those statements instead. Lenders will apply a business expense factor—typically 25-50%—to account for overhead, materials, and other costs.
Combination Approach
Some programs allow you to use both personal and business statements to present the most complete picture of your finances. Your loan officer can help determine which approach maximizes your qualifying income.
Credit and Down Payment Requirements
Bank statement loans are flexible, but they're not no-doc loans. You'll still need to meet specific criteria.
Credit Score Requirements
Most bank statement loan programs require a minimum credit score of 680, though some lenders may go as low as 660. Higher credit scores (720+) typically result in better rates and terms.
Down Payment Guidelines
Expect to put down at least 10-20% depending on the program, property type, and your overall financial profile. Larger down payments often unlock better pricing and more favorable terms.
Cash Reserves
Lenders typically require 6-12 months of reserves (enough to cover your mortgage payment for that period) after closing. This provides a cushion and demonstrates financial stability.
Property Types
Bank statement loans are available for primary residences, second homes, and investment properties—though requirements may be stricter for non-owner-occupied properties.
Requirements at a Glance
Here's what you can generally expect when applying for a bank statement loan:
| Requirement | Typical Guidelines |
|---|---|
| Credit Score | 680 minimum (720+ preferred) |
| Down Payment | 10-20% minimum |
| Bank Statements | 12 or 24 months (personal or business) |
| Tax Returns | Not required |
| Cash Reserves | 6-12 months recommended |
| Debt-to-Income Ratio | Generally 43-50% maximum |
| Property Types | Primary homes, second homes, investment properties |
CNA Equity Group's Bank Statement Loan Programs
At CNA Equity Group, we've spent over 24 years helping self-employed borrowers and business owners secure financing that reflects their real financial strength—not just what their tax returns show.
We understand that running a business means making smart decisions about deductions, reinvestment, and cash flow management. Our bank statement loan programs are designed to work with your business structure, not against it.
When you work with us, you get:
- Expert guidance on which statements to use and how to present your income
- Access to multiple lenders specializing in self-employed financing
- Clear explanations of how your income will be calculated
- Personalized service from professionals who understand entrepreneurship
- Streamlined process designed to move quickly without unnecessary hassles
We'll review your bank statements, help you understand your qualifying income, and match you with the right loan program for your situation.
Ready to Explore Your Options?
If you're self-employed, own a business, or simply don't want to use tax returns to qualify for a mortgage, a bank statement loan may be exactly what you need.
Let's discuss your specific situation and determine if this program is the right fit. We'll walk you through the process, answer your questions, and help you move forward with confidence.
Call us today at (925) 244-1505 to speak with a bank statement loan specialist.