Bank Statement Loan

What Is a Bank Statement Loan?

A bank statement loan is a type of non-qualified mortgage (Non-QM) designed for self-employed borrowers, independent contractors, and small business owners who may not qualify using traditional income documentation like W-2s or tax returns. Instead, lenders use personal or business bank statements to calculate income and determine eligibility.

How It Works

Borrowers provide 12–24 months of personal or business bank statements instead of tax returns.
Lenders average deposits to determine qualifying income.
Some programs allow expense ratios to be applied to business accounts, while personal statements often use total deposits.
Verification of consistent income flow is key to approval.

Down Payment Requirements

Typically requires a 10–20% down payment, depending on credit score and loan amount.
Some lenders may allow higher loan-to-value (LTV) with stronger credit profiles.

Credit Score Requirements

Minimum FICO score of 620–660, depending on lender.
Higher credit scores (700+) generally allow for lower down payments and better rates.
Some lenders may apply overlays, such as requiring higher reserves or stricter DTI limits

Fun Facts & Insider Details

Both personal and business bank statements may be used, depending on the program.
Expense ratios (often 50%) are applied to business statements unless verified by a CPA.
Some programs allow 1099 income to be considered similarly to bank statement programs.

Who Is the Best Candidates for a Bank Statement Loan?

Self-employed borrowers with significant write-offs on tax returns.
Independent contractors and freelancers paid via deposits instead of payroll.
Small business owners with consistent cash flow but lower reported taxable income.
Buyers who may not qualify under conventional or FHA guidelines but have strong income shown in bank deposits.

Important Things to Know

These are considered Non-QM loans, meaning they don’t meet standard Fannie Mae or Freddie Mac guidelines.
Interest rates are generally higher than traditional loans, but flexibility makes them attractive for self-employed clients.
Borrowers must show stable deposits and may need to document business ownership with licenses or CPA letters.
Loan amounts can be high, with many lenders offering jumbo bank statement loans.
Reserve requirements may apply (often 6–12 months of mortgage payments in savings).

FAQs – Standard 97% LTV Loan

Is this the same as HomeReady or Home Possible?

No. While they also allow 3% down, HomeReady and Home Possible have income and area restrictions. The Standard 97% loan is broader but requires at least one borrower to be a first-time buyer.
Can I use this program for a multi-unit property?

No. This program is limited to 1-unit primary residences.
Do I have to take a homeownership education course?

Possibly. If all borrowers are first-time buyers, at least one will need to complete an approved education course.
Is PMI permanent?

No. PMI can be removed once you reach 20% equity.

Next Step

If you are self-employed or an independent contractor and have struggled to qualify for a traditional loan, a bank statement loan may be the right solution. Contact Torres & Co. Lending today to review your bank statements and begin the pre-approval process.

Apply Now

⚖️ Disclaimer: This guide is for educational purposes only. Loan approval and terms depend on credit, income, assets, property type, and program guidelines.