Self-Employed & Small Business Guide
Updated
Banks judge W-2 paychecks. Owners don’t live on W-2s. Bank statement loans use your deposits to size the loan. Clean, simple, workable.
What is a bank statement loan?
A bank statement mortgage lets self-employed borrowers qualify with business or personal bank statements in place of tax returns. Lenders review deposits over 12 or 24 months to estimate income, then size the loan from that number.
Who is this for?
- Owners who write off a lot of expenses
- 1099 pros and gig teams
- Newer businesses with strong deposits
- Partners with irregular pay cycles
How income is calculated
Each lender has a method, yet the idea stays the same: start with deposits, apply a factor, get monthly income.
Personal statements
Average monthly deposits × 100% = qualifying income (if all revenue lands in personal accounts).
Business statements
Average monthly deposits × an expense factor (often 50–70%) = qualifying income.
The expense factor depends on your industry and CPA letter. We size this before you shop homes.
Rates, terms, and documents
- Rates: higher than conventional, yet far better than hard money.
- LTV: up to 85–90% on purchases in many cases.
- Credit: mid-600s can work. Stronger files price better.
- Docs: 12–24 months of statements, ID, entities, P&L or CPA letter, reserves.
Common mistakes to avoid
- Mixing funds. Keep business and personal deposits clean.
- Big cash swings. Sudden spikes or drops raise flags. Plan the look-back period.
- Too many NSF fees. They suggest stress. Clean up two months before you apply.
- No reserves. Aim for 3–6 months of payments in the bank.
How this compares
vs Conventional
Conventional leans on tax returns. If write-offs crush your AGI, a bank statement loan can fit better.
vs DSCR (investors)
DSCR ignores your income and looks at rent. Bank statement loans suit homes you will live in or second homes.
vs SBA
SBA funds businesses. Bank statement loans fund homes. If you need both, we can map the stack.
Next steps
Qualified Home Mortgage • NEXA Mortgage, NMLS #1660690 • Steven “Harry” Protopappas, NMLS #2543750. Rates and terms change. Not a commitment to lend. Equal Housing Lender.
FAQ
Do I need perfect credit?
No. Mid-600s can work. Strong assets and clean statements help rate and approval.
Can I use business statements only?
Yes. We apply an expense factor to reach income. A CPA letter can improve that factor.
Is this only for primary homes?
No. Many lenders allow second homes. For rentals, DSCR can be a better fit.
How fast can we close?
With full docs ready, many files clear in weeks, not months. Clean statements speed this up.