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A bank statement mortgage is a type of non-QM (non-qualified mortgage) loan that allows borrowers to qualify using bank statements instead of tax returns to verify income. These loans are designed primarily for self-employed individuals, business owners, and independent contractors whose tax returns may not accurately reflect their true earning capacity.

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Why Bank Statement Mortgages Exist

Self-employed borrowers often write off significant business expenses to minimize their tax liability. While this is a smart tax strategy, it creates a problem when applying for a traditional mortgage—lenders see a lower adjusted gross income on tax returns than what the borrower actually earns. For example, a business owner might gross $300,000 annually but show only $80,000 on their tax return after deductions. A traditional lender would qualify them based on the $80,000, severely limiting their buying power. Bank statement mortgages solve this by looking at actual cash flow deposits rather than taxable income.

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How It Works

Instead of providing two years of tax returns, borrowers submit 12 or 24 months of consecutive bank statements. The lender analyzes these statements to calculate qualifying income based on:
  • Total deposits over the statement period
  • An expense factor that accounts for business costs (typically 10-50% depending on the lender and business type)
  • Average monthly income derived from the adjusted deposit total
The resulting figure becomes the borrower’s qualifying income for debt-to-income ratio calculations.

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Who Offers Bank Statement Mortgages

Bank statement loans are offered by non-QM lenders, which include specialty mortgage companies, portfolio lenders, and some credit unions. They are not available through government-backed programs like FHA, VA, or conventional Fannie Mae/Freddie Mac loans. Because these loans carry more risk for lenders, they typically come with:
  • Higher interest rates (often 0.5% to 2% above conventional rates)
  • Larger down payment requirements (typically 10-20% minimum)
  • Higher credit score thresholds
  • More substantial reserve requirements

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Bank Statement Mortgages vs Stated Income Loans

Bank statement mortgages are sometimes confused with the “stated income” loans that contributed to the 2008 financial crisis. They are not the same. Stated income loans allowed borrowers to simply declare their income without verification. Bank statement mortgages require documented proof of income through actual bank deposits—every dollar must be traceable and legitimate. These loans are fully documented, just with a different documentation type than traditional mortgages.

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When a Bank Statement Mortgage Makes Sense

This loan type is ideal when:
  • You’ve been self-employed for at least two years
  • Your tax returns understate your actual income due to write-offs
  • You have strong cash flow reflected in your bank statements
  • You have good credit and funds for a larger down payment
  • You need financing that traditional lenders won’t approve
It may not be the right fit if you have inconsistent deposits, heavy cash-based income that doesn’t flow through your bank accounts, or if you qualify for a conventional loan with better terms.