What Is a Bank Statement Loan?
A Bank Statement Loan is a mortgage designed primarily for self-employed borrowers whose income may be difficult to document through traditional mortgage guidelines.
Instead of relying primarily on tax returns, W-2 forms, or pay stubs, these programs use eligible deposits from personal or business bank accounts to help determine qualifying income.
Bank Statement Loans are typically considered non-qualified mortgages (non-QM), meaning they use alternative documentation and underwriting requirements.
You still need to demonstrate your ability to repay the mortgage. The difference is how your qualifying income is evaluated.
Benefits of a Bank Statement Loan
For eligible self-employed homebuyers, Bank Statement Loans may offer several advantages.
- Alternative Income Documentation: Qualify using eligible bank deposits rather than relying primarily on tax returns.
- Designed for Self-Employed Borrowers: Financing options for business owners, freelancers, consultants, and independent contractors.
- Personal or Business Statements: Certain programs accept qualifying deposits from personal or business accounts.
- Purchase or Refinance Options: Financing may be available for eligible home purchases and refinances.
- Flexible Income Evaluation: Certain programs may better accommodate borrowers with variable income or substantial business deductions.
Who Can Qualify for a Bank Statement Loan?
Bank Statement Loans may be an option for borrowers who earn income through:
- Small business ownership
- Freelance or consulting work
- Independent contracting
- Commission-based self-employment
- Sole proprietorships
- Partnerships or other eligible business structures
These loans can be particularly useful when tax deductions reduce the income reported on your tax returns, even though your business generates consistent deposits.
However, not every deposit counts as qualifying income. Lenders must evaluate the source and consistency of deposits, business expenses, and other financial factors.
How Do Bank Statement Loans Work?
Instead of calculating income primarily from tax returns, a lender reviews eligible bank statements to establish a qualifying income amount.
Depending on the program, you may need to provide 12 or 24 months of personal or business bank statements.
For business accounts, lenders generally account for business expenses rather than treating every deposit as personal income.
The lender also reviews your credit history, down payment or equity, assets, debts, and property eligibility.
Example: Qualifying Income Using Bank Statements
Suppose a self-employed borrower has an average of $12,000 in monthly eligible business deposits.
If the applicable program uses a 50% business expense factor, the estimated qualifying income would be $6,000 per month.
| Example |
Amount |
| Average Monthly Eligible Deposits |
$12,000 |
| Illustrative Business Expense Factor |
50% |
| Estimated Monthly Qualifying Income |
$6,000 |
This is a simplified illustration. Actual calculations depend on the program, account type, business expenses, eligible deposits, and underwriting requirements.
What Are the Requirements for a Bank Statement Loan?
Requirements vary by lender and program, but commonly include:
- Bank Statements: Often 12 or 24 months of qualifying statements.
- Self-Employment History: Documentation showing an established eligible business or self-employment activity.
- Credit History: A qualifying credit profile based on the selected program.
- Down Payment or Equity: The required amount varies based on credit, loan amount, and property type.
- Assets and Reserves: Certain programs require additional funds available after closing.
- Debt-to-Income Ratio: The lender evaluates your ability to manage the proposed mortgage payment and other obligations.
Your Loan Officer can help determine which documentation and financing options apply to your situation.
Bank Statement Loan vs. Conventional Loan
| Feature |
Bank Statement Loan |
Conventional Loan |
| Income Documentation |
Eligible bank deposits and alternative documentation |
Traditional qualifying income documentation |
| Best Suited For |
Eligible self-employed borrowers |
Borrowers meeting standard conventional guidelines |
| Tax Returns |
May not be required for qualifying income |
Often required for self-employed borrowers |
| Down Payment |
Varies by program |
As low as 3% for eligible borrowers |
| Interest Rates |
May be higher than comparable conventional loans |
Depends on borrower qualifications and market conditions |
| Underwriting |
Alternative documentation guidelines |
Standard conventional guidelines |
A Bank Statement Loan isn’t automatically the best option for every self-employed borrower. Many business owners can qualify for conventional financing.
Michigan Mortgage can help you compare available programs and understand the overall costs.
Frequently Asked Questions About Bank Statement Loans
Can I get a mortgage using bank statements instead of tax returns?
Possibly. Eligible self-employed borrowers may qualify for certain mortgage programs using personal or business bank statements to document income.
How many months of bank statements do I need?
Many programs require 12 or 24 months of eligible statements. The documentation period depends on the lender and loan program.
Are Bank Statement Loans only for business owners?
They are primarily designed for eligible self-employed borrowers, which may include business owners, freelancers, consultants, and independent contractors.
Can I qualify if I take large business tax deductions?
Possibly. Bank Statement Loans may offer an alternative income calculation for self-employed borrowers whose taxable income is reduced by legitimate business deductions.
Do I need a down payment?
For a home purchase, yes, most Bank Statement Loan programs require a down payment. The amount depends on your qualifications and the program.
Are Bank Statement Loan interest rates higher?
They may be higher than rates on comparable conventional mortgages because the programs use alternative income documentation. Actual pricing depends on credit, down payment, loan terms, and other factors.
Can I refinance with a Bank Statement Loan?
Possibly. Certain programs offer rate-and-term or cash-out refinancing, subject to eligibility and lender requirements.
Can I use business bank statements?
Yes. Certain programs allow qualifying business bank statements, although lenders generally adjust eligible deposits to account for business expenses.
Can I get a Bank Statement Loan in Michigan?
Michigan Mortgage can help eligible borrowers explore Bank Statement Loan financing for qualifying properties in Michigan, subject to current program availability and underwriting requirements.
Explore Your Bank Statement Loan Options with Michigan Mortgage
Being self-employed shouldn’t mean your mortgage options are limited to a single way of documenting income.
At Michigan Mortgage, we help borrowers throughout West Michigan explore financing options that fit their financial circumstances.
Whether you’re purchasing your first home, moving into your next home, or considering refinancing, we’re here to help you understand what’s possible.
Let’s find a mortgage option that works for you.
All loans are subject to credit approval, income verification, underwriting requirements, property eligibility, and applicable program guidelines. Bank Statement Loans may have different interest rates, down payment requirements, and costs than conventional mortgages. Not all applicants will qualify.
