The Basics
What Is a Bank Statement Loan?
A bank statement loan qualifies you based on cash deposits into your bank account — not your tax return income. Instead of W-2s and Schedule C, you provide 12 or 24 months of personal or business bank statements. The lender calculates your qualifying income from average monthly deposits, often applying an expense ratio to business accounts.
This is the most widely used Non-QM program because it directly addresses the self-employed borrower's core problem: tax write-offs reduce taxable income, but don't reduce real cash flow. A business owner who deposits $25,000/month but shows $60,000 net on their Schedule C qualifies on actual cash flow — not the IRS's version of it.
12
Months of statements (minimum)
620+
Typical min. credit score
10%
Minimum down (primary)
$3M+
Loan amounts available
Income Calculation
How Bank Statement Income Is Calculated
Income calculation differs between personal and business bank statements. Lenders apply different expense ratios depending on account type and sometimes industry.
Personal Bank Statements
All deposits are counted as income. Average monthly deposits over the statement period = qualifying monthly income. Clean and straightforward — no expense ratio applied.
Example: $240,000 in deposits over 12 months = $20,000/month qualifying income.
Business Bank Statements
An expense ratio is applied to account for business operating costs. Common ratios: 50% for most businesses, up to 75% for higher-margin businesses. The remaining percentage is your qualifying income.
Example: $300,000 in deposits over 12 months × 50% expense ratio = $12,500/month qualifying income.
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12 months vs. 24 months — what's the difference?
24-month bank statement programs typically offer better rates and higher loan amounts because they provide more income stability evidence. 12-month programs are available but may carry slightly higher rates or stricter LTV limits. If your income has grown recently, 12 months may actually show higher qualifying income — Bayou Mortgage will run both calculations and show you which is better for your file.
Requirements
Bank Statement Loan Requirements
RequirementTypical Standard
Credit Score
620+ (better pricing at 700+)
Statements Required
12 or 24 months personal or business
Self-Employment History
2 years in same business (verified)
Min. Down (Primary)
10% (at 680+ credit)
Min. Down (Investment)
20–25%
Max Loan Amount
Up to $3M+ on some programs
Property Types
Primary, second home, investment
Comparison
Bank Statement vs. Full Doc Loan
The right choice depends on whether your tax return income is sufficient to qualify conventionally. See the full comparison →
| Factor | Bank Statement | Full Doc (Conventional) |
|---|
| Income Source | Avg. monthly deposits | Tax return net income |
| Tax Returns Required | No | Yes — 2 years |
| Ideal For | Heavy write-off self-employed | W-2 or clean tax return income |
| Min. Down Payment | 10% | 3–5% |
| Rate vs. Conventional | +0.50%–1.50% premium | Baseline |
| Loan Amount | Up to $3M+ | Up to $806,500 (conforming) |
Common Questions
Bank Statement Loan FAQ
Do I have to be self-employed for a bank statement loan? +
Typically yes. Bank statement loans are designed for self-employed borrowers whose business write-offs reduce their taxable income below what's needed to qualify conventionally. Most lenders require 2 years of self-employment history in the same business. W-2 employees with supplemental income sometimes qualify through hybrid programs, but the core product is built for the self-employed.
What if I have both personal and business accounts? +
You can use either or both. Many lenders let you choose — personal statements (no expense ratio) vs. business statements (with expense ratio). If your personal account shows strong consistent deposits, personal statements often produce higher qualifying income. Bayou Mortgage will run both calculations and use whichever produces the better outcome for your file.
What happens if my deposits are inconsistent month to month? +
Lenders average the deposits over the full statement period. Seasonal or variable income isn't disqualifying — it just produces an average. However, if one or two months have unusually large deposits (e.g., a property sale, a lawsuit settlement), the lender may exclude those from the average. Consistent operating deposits matter more than spikes.
Can I use bank statements to refinance? +
Yes. Bank statement loans are available for rate-and-term refinances and cash-out refinances. Cash-out bank statement refinances are particularly useful for self-employed borrowers who have built equity and want to access it without documenting income through tax returns.
How much higher is the rate vs. a conventional loan? +
Typically 0.50%–1.50% above comparable conventional rates, depending on credit score, LTV, loan amount, and the specific lender. A borrower with a 740 credit score at 75% LTV on a $500,000 bank statement loan will price much better than a 640 score at 90% LTV. Bayou Mortgage shops multiple Non-QM lenders to find the most competitive pricing for your specific file.
Is there a prepayment penalty? +
Some bank statement loan programs include a prepayment penalty — typically a 3-year or 5-year step-down structure (e.g., 3/2/1 means 3% penalty in year 1, 2% in year 2, 1% in year 3). Not all programs have them, and paying a point or two at closing can sometimes buy out the penalty. Bayou Mortgage will disclose this clearly upfront so you can factor it into your decision.
Ready to See What You Qualify For?
Tell Bayou Mortgage your monthly deposits, credit score, and purchase price. We'll calculate your qualifying income and match you to the best bank statement program available.
