If you’re self-employed and struggling to qualify for a mortgage using your tax returns, you’re not alone.
Business owners, entrepreneurs, and contractors often make great money — but on paper, their income looks too low to qualify for a traditional mortgage. That’s exactly why bank statement loans exist.
These loans allow self-employed borrowers to qualify based on real cash flow instead of tax returns.
In this post, I’ll explain everything you need to know about bank statement loans and this way, you can see if they’re a good fit for you.
What Is a Bank Statement Loan?
A bank statement loan is a mortgage designed specifically for self-employed borrowers who don’t qualify using W-2s or tax returns.
Instead of reviewing your reported income, lenders analyze your bank statements to determine how much you actually earn. Income is calculated using deposits shown over a 12- or 24-month period, giving a much more accurate picture of your financial reality.
How Income Is Calculated Using Bank Statements
Instead of focusing on net income after deductions, lenders review your bank statements and average your monthly deposits.
Depending on the lender and program:
Personal or business bank statements may be used
Deposits are averaged over 12 or 24 months
An expense factor may be applied to business accounts
The goal is to verify that income is consistent, recurring, and sustainable.
This approach allows lenders to approve borrowers who would otherwise be declined under traditional guidelines.
💡 Pro Tip: Bank Statement Loans use 50% of your deposits as your income. However, it can be as much as 75% in some cases.
Who Qualifies for a Bank Statement Loan?
Bank statement loans are strictly for self-employed borrowers. To qualify, most lenders require at least two years of self-employment history.
These loans are commonly used by borrowers who:
Write off a large portion of their income
Show low net income on tax returns
Owe money to the IRS and can’t use government loans
Have variable or contract-based income
Own multiple businesses or income streams
If your bank deposits clearly show income — even if your tax returns don’t — this loan may be a strong option.
Bank Statement Loan Requirements
While guidelines vary, most bank statement loans follow similar requirements.
Interest rates are typically higher than conventional loans. In today’s market, rates often start in the 6% range and adjust based on credit, down payment, and overall risk.
Down payment requirements are higher than traditional loans.
Borrowers with a 700+ credit score may qualify with as little as 10% down, while those below 700 generally need 15% or more.
Because these loans are not backed by Fannie Mae or Freddie Mac, they fall under non-QM guidelines, which allow flexibility but come with higher pricing. The fact that they are not a conventional loan, is also the reason why your tax returns are not needed.
Are Bank Statement Loans Right for you?
If you qualify for a conventional or government loan, those options usually offer lower rates and better terms. If that’s the case, you should look into those programs instead.
However, if you’re a business owner or contractor and your tax returns don’t reflect your true earning power, a bank statement loan may be the best path forward.
Also, you have the ability to put a larger amount for a down payment. As I mentioned before, these loans require a minimum 10% down payment and in some cases even more.
💡 Pro Tip: We are experts in Bank Statement Loans and other Non-QM loans. Book a call with us by clicking this link.
Other loans that don't require tax returns
if the bank statement loan program is not ideal for you because you have inconsistent deposits in your bank account, you may have other options in the Non-QM space. These are some of them:
- Profit & Loss Statement Loans: These mortgages require you to show a CPA or a self-prepared P&L for at least one year.
- 1099 Income Loan: These loans are great for those who receive a 1099. For example, real estate agents and other contract-based jobs benefit greatly with this loan.
- Asset Based Loans: If you have liquid funds, lenders may use these in lieu of consistent income.
- DSCR Loan: This is an investment property loan that does not require any income documentation.
The bottom line
We are mortgage brokers, and we work with self-employed borrowers every day who’ve been told “no” by banks — even though they clearly have the income.
If you want to know whether a bank statement loan makes sense for your situation, reach out. We’ll review your income, bank statements, and goals and give you a straight answer.
Ready to take the next step? Book a call with by clicking this link here to get started.
