> ## Documentation Index
> Fetch the complete documentation index at: https://cameron.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# How Bank Statement Income is Calculated

> Understanding the methodology lenders use to calculate qualifying income from your bank statements

Bank statement income calculation determines how much you can borrow. Unlike traditional mortgages where income comes directly from tax returns, bank statement lenders derive your income from deposit activity.

## The Basic Formula

**Eligible Deposits − Expense Adjustment = Qualifying Income**

1. Add up all eligible deposits over the statement period (12 or 24 months)
2. Subtract ineligible deposits (transfers, loans, gifts, etc.)
3. Apply an expense factor if using business statements
4. Divide by the number of months to get average monthly income

## Example Calculation

A borrower submits 12 months of business bank statements showing \$600,000 in total deposits. The lender identifies \$50,000 as ineligible transfers and applies a 50% expense factor.

| Step                          | Calculation  |
| ----------------------------- | ------------ |
| Total deposits                | \$600,000    |
| Less ineligible deposits      | −\$50,000    |
| Net eligible deposits         | \$550,000    |
| Less 50% expense factor       | −\$275,000   |
| Adjusted annual income        | \$275,000    |
| **Monthly qualifying income** | **\$22,916** |

## Personal vs Business Statements

**Personal bank statements** typically use a low expense factor (0-10%) since deposits are assumed to be after-expense income.

**Business bank statements** use higher expense factors (30-50%) because revenue includes money that goes toward operating costs.

## What Counts as a Deposit

**Eligible:** Business revenue, client payments, accounts receivable, regular income patterns.

**Ineligible:** Transfers between your own accounts, loan proceeds, gift funds, tax refunds, one-time asset sales, insurance claims.

Large or irregular deposits require explanation and documentation.

## Expense Factors by Business Type

| Business Type                      | Typical Expense Factor |
| ---------------------------------- | ---------------------- |
| Professional services / consulting | 10-30%                 |
| Real estate agents                 | 20-40%                 |
| Contractors / tradespeople         | 30-50%                 |
| Retail / restaurants               | 40-60%                 |

Providing a CPA letter or profit and loss statement may allow a lower expense factor, increasing your qualifying income.

## Maximizing Your Qualifying Income

* Use the statement period (12 vs 24 months) that shows higher average deposits
* Ensure all legitimate income flows through the accounts you're submitting
* Minimize account-to-account transfers that get flagged as ineligible
* Provide documentation to justify a lower expense factor
* Shop lenders—calculation methodology varies and small differences add up