Use your bank deposits as income to qualify as a self employed borrower. We don’t look at your tax returns at all. 12 or 24 months of personal or business statements, deposits averaged, expense factor applied. As little as 10% down with a 680 credit score.

Bank Statement Mortgage Program for Income

Attention all self-employed individuals! We have great news for you. You don’t have to use your tax returns to qualify for a mortgage! We can average your bank statement deposits for income. If you’ve been using every tax deduction possible, it often leads to a lower net income on your tax returns, and you might find it challenging to qualify for a mortgage. However, with our Bank Statement Mortgage Program, your income is calculated from your bank statements rather than tax returns. This means we look at your deposits, not your debits or net balance, to determine your income.

Here is how it works: You provide either 12 months of personal bank statements or 12 months of business bank statements. We then average the monthly deposits. From there an expense factor is given depending on the profile of your business. Anywhere between 50% to 90% of your deposits can be used as income! This can drastically change the amount you can be pre-approved for as opposed to using your tax returns to qualify.

This program can be used for primary residences, second homes, or investment properties. Remember, we don’t even glance at your tax returns. Instead, we focus on your bank deposits. Deposits must be generated from the business and can’t be sourced from transfers from other accounts. This approach has saved many deals where self-employed borrowers couldn’t secure financing elsewhere.

Additionally, unlike conventional financing, you won’t have to pay for mortgage insurance even if your down payment is less than 20%. Remember though, if you have been self employed for 5 years or more we can use 1 year of tax returns with conventional financing. Sometimes it pays to pay Uncle Sam for a year to get the lowest rate possible.

You Have to Be Self Employed

To utilize a bank statement mortgage program you need to be self employed. That means either you have an S corporation, a C-corporation, an LLC, or you are a sole proprietor. Additionally, you also need to have been self employed at least two years. In some cases we can get 1 year of self employment approved. In order for us to verify that you have been self employed we need to show that a business has been incorporated for that long through the state or that you have held a license of some sort within your industry. We can typically verify this through the online state business record website that you are incorporated in. Additionally a letter from your CPA stating how long you have been self employed would suffice. Remember we are not looking at your tax returns, because we are only using the deposits in your bank account.

Minimum Credit Score and Down Payment Requirements

With a 680 credit score you can finance a primary residence with as little as 10% down. We can go to a 575 credit score with as little as 35% down. A 625 score requires 25% down, and a 650-700 score requires 20% down.

How Is My Income Calculated?

Your income is calculated using a factor of your total deposits averaged over 12 to 24 months. That factor can be anywhere from 50% of total deposits to 90% of the total deposits. Large one time deposits or transfers coming from another account would need to be sourced. The factor varies by the line of work you are in and the makeup of your company. For instance if you have a million dollars of deposits coming into your account each month but you have 100 employees, that would have an impact on how much of the deposits we can use for income.

The minimum is 50% of your monthly deposit average. If you are in a line of work that allows you to work from home and you have minimal expenses for your line of work, up to 90% of your deposits can be used for income. Using 24 months of bank statements can help lower your interest rate. You can also use more than one account to qualify.

What Else Do I Need to Know About Bank Statement Mortgage Programs?

Bank statement mortgage programs are a little different than our standard mortgage programs but in no way are they inferior. The truth is paying a little more for an interest rate can be cheaper than paying Uncle Sam. The savings on your tax returns might easily outweigh the higher rate you would pay with a bank statement program. However, it’s a great loan program but there’s a few caveats to keep in mind.

If you want to finance a manufactured home with the program it’s going to require at least 30% down. The minimum loan amount is $150,000 on most bank statement mortgage programs. With exception, $100,000 might be possible. Income producing farms are difficult to finance as well. We may have other products that can work.

What Counts as a Deposit (and What Doesn’t)

First thing is first, only business-generated deposits count toward your qualifying income. Transfers between your own accounts are stripped out before we calculate the average. Same with refunds, tax refunds, gifts, loan proceeds, or anything else that isn’t earned business revenue. The underwriter goes through the bank statements line by line and removes anything that doesn’t qualify, then averages what’s left.

Keep in mind that one-time large deposits get scrutinized. If you sold a piece of equipment for $30,000 and that hits your business account, the underwriter will likely strip it out as non-recurring. Same with insurance settlements and any other lump sum that isn’t your normal business income. The cleaner your bank statements look month over month, the higher your qualifying income comes in. If you know you’re going to apply in the next 12 months, that’s worth keeping in mind for how you handle deposits.

Why Bank Statement Loans Work for the Self-Employed

Frequently Asked Questions about Using Bank Statements for Mortgage Income Qualification

Get a No-Hassle Bank Statement Pre-Approval

Send us 12 months of bank statements, your FICO range, and target purchase price. On weekdays we’ll come back with a real pre-approval and the qualifying income number from your deposits in 24 hours or less.