Bank Statement Loans for Self-Employed Borrowers

Bank Statement Loans

What is a Bank Statement Loan?

A Bank Statement Loan is a type of mortgage designed for self-employed individuals, business owners, and borrowers with non-traditional income. Instead of relying on W-2s or tax returns, lenders use personal and/or business bank statements to verify income and determine loan eligibility. This makes it easier for those with fluctuating income or significant business write-offs to qualify for a home loan.

Benefits of a Bank Statement Loan

• Allows income verification without W-2s or tax returns
• Flexible for self-employed borrowers with variable income
• Loan amounts up to $5 million available with some lenders
• Higher debt-to-income (DTI) ratios permitted compared to conventional loans
• Funds can be used for primary homes, second homes, or investment properties

Who Should Consider a Bank Statement Loan?

• Self-employed borrowers who may not qualify using traditional documentation
• Small business owners with significant write-offs on tax returns
• Gig economy workers, freelancers, and contractors
• Real estate investors with rental income shown on deposits

Eligibility

• Typically requires 12–24 months of bank statements
• Minimum credit score of 620 (higher scores may receive better terms)
• Must demonstrate stable and sufficient monthly deposits to cover mortgage obligations
• Down payment requirements typically range from 10–20%

Is It Right for You?

If you’re self-employed, have multiple income streams, or cannot provide standard W-2 income documentation, a bank statement loan can offer the flexibility you need to qualify for a mortgage.

Key Requirements

• Proof of personal and/or business bank statements
• Minimum credit score of 620 (higher preferred)
• Lower loan-to-value ratios (often capped at 80–90%)
• Adequate reserves may be required depending on loan size and property type

Types of Income That May Qualify

• Self-employment income shown through deposits
• Business revenue from services or product sales
• Rental property income
• Contract and freelance payments
• Other alternative income sources (e.g., royalties, commissions, consulting fees)

Documents Needed

• 12–24 months of personal or business bank statements
• Valid business license (if applicable)
• Proof of assets (bank or investment account statements)
• Photo ID and proof of residency
• Property information once under contract

Advantages Over Other Loan Types

• No tax returns or W-2s required
• Greater flexibility for self-employed borrowers
• Larger loan amounts available compared to FHA or VA loans
• Multiple income sources can be combined to qualify

Considerations

• Higher interest rates compared to conventional loans
• Larger down payments may be required (10–20%)
• More extensive documentation may be needed (business financials, licenses, etc.)
• Not all lenders offer this loan type

FAQ

Q: How many months of bank statements are required?
A: Most lenders require 12–24 months of personal or business bank statements.

Q: Do bank statement loans have higher interest rates?
A: Yes, rates are typically higher than conventional loans due to the alternative income documentation method.

Q: Can I use both personal and business bank statements?
A: Yes, lenders allow either personal, business, or a combination, depending on the program.

Q: Are investment properties eligible?
A: Yes, bank statement loans may be used for primary residences, second homes, and investment properties.