Bank Statement Mortgage Program Overview

Purpose:
The Bank Statement Program is designed for self-employed borrowers and business owners who may not show sufficient income on tax returns due to write-offs or business deductions. Instead of traditional tax documentation, lenders use 12 or 24 months of bank statements to calculate qualifying income based on actual deposits.

Program Parameters

Feature

12-Month Bank Statements

24-Month Bank Statements

Documentation

Most recent 12 months of personal or business bank statements

Most recent 24 months of personal or business bank statements

Borrower Type

Self-employed ≥ 2 years

Self-employed ≥ 2 years

Acceptable Accounts

Personal, business, or combined (depending on lender)

Personal, business, or combined

Income Calculation

Average of monthly deposits × expense factor (varies by industry)

Same formula; longer average provides stability and potentially higher qualifying income

Expense Ratio (default)

50% unless CPA/LOE verifies lower

50% unless CPA/LOE verifies lower

Minimum Credit Score

660–680 (varies by LTV and lender)

660–680 (varies)

Maximum LTV

Up to 90% LTV for primary, 80% for investment

Up to 90% LTV for primary, 80% for investment

Loan Amounts

Up to $3 million (varies by lender)

Up to $3 million (varies)

Property Types

1–4 unit, condo, PUD, non-warrantable (case-by-case)

Same

Debt-to-Income (DTI)

Generally ≤ 50%

Generally ≤ 50%

Underwriting Guidelines

  • Deposits Used: Regular business income deposits only (no transfers, loans, or one-time deposits).
  • Business Accounts: Lender applies an expense factor (typically 40%–60%) unless a CPA letter justifies a lower ratio.
  • Personal Accounts: 100% of deposits may be used if the account clearly reflects income from the borrower’s business.
  • Verification:
    • Proof of business existence for at least 2 years (license, CPA letter, website, or business listing).
    • Year-to-date P&L may be required for income consistency.
  • Reserves: Usually 3–12 months PITI depending on credit and LTV.
  • Property Use: Primary, second home, or investment properties eligible.

Advantages of 12- and 24-Month Options

12-Month Bank Statement Option

  • Ideal for borrowers with consistent income or recent business growth.
  • Less documentation and faster processing time.
  • Reflects current earning power rather than older historical performance.
  • Good for self-employed borrowers with steady cash flow and healthy deposits.

24-Month Bank Statement Option

  • Provides income stability and a longer track record for underwriting.
  • Smooths out fluctuations in monthly cash flow or seasonal businesses.
  • May yield higher average qualifying income for businesses with strong multi-year performance.
  • Reduces lender risk — often results in better pricing or higher LTV approval.

Key Benefits for Borrowers

✅ Qualify without tax returns, W-2s, or pay stubs
✅ Ideal for self-employed borrowers and gig economy professionals
✅ Recognizes real cash flow, not taxable income after deductions
✅ Flexible structure: use personal or business accounts
✅ Higher loan amounts and LTVs than traditional full-doc loans
✅ Can be combined with Interest-Only or Non-QM loan programs