Bank Statement Loans

Being self-employed has plenty of advantages, but getting a mortgage can sometimes feel more complicated.

Business owners, freelancers, consultants and other self-employed professionals may have income that doesn’t look the same from year to year. Business expenses and tax deductions can also make traditional income documentation more difficult to use for certain borrowers.

That’s where bank statement loans may provide another financing option.

What Is a Bank Statement Loan?

A bank statement loan is a type of alternative mortgage financing that may allow an eligible borrower to document income using bank statements rather than relying solely on traditional income documentation.

Instead of looking only at W-2 income or conventional tax-return calculations, the lender may review deposits shown in personal or business bank accounts to evaluate cash flow.

Because these are generally Non-QM financing options, requirements can vary significantly from one lender to another.

That means not every borrower will qualify, and the documentation requirements can be different depending on the lender and the specific program.

Who May Consider a Bank Statement Loan?

Bank statement financing may be worth exploring for borrowers whose income is primarily generated through self-employment.

This can include:

• Business owners
• Independent contractors
• Freelancers
• Consultants
• Real estate professionals
• Medical or professional practice owners
• Other self-employed borrowers

Why Traditional Income Documentation Can Be Challenging

A business owner may generate substantial revenue while also having legitimate business expenses that reduce taxable income.

For example, a business owner might have significant gross deposits but report a much lower taxable income after deductions.

That can create a disconnect between the cash flow of the business and the income shown on a traditional tax return.

A bank statement program may provide another way for an eligible borrower to document income, depending on the lender’s underwriting requirements.

What Bank Statements Are Typically Reviewed?

Requirements vary by lender, but a bank statement program may involve reviewing a history of bank account activity to understand the borrower’s cash flow.

The lender may look at factors such as:

• Deposit history
• Consistency of deposits
• Account ownership
• Business or personal account activity
• Large or unusual deposits
• Overall financial profile

Bank Statement Loans Are Not ‘No Documentation’ Loans

This is an important distinction.

A bank statement mortgage still requires documentation and underwriting.

The lender needs enough information to evaluate the borrower’s ability to repay the loan and determine whether the loan meets the applicable requirements.

The fact that a program uses bank statements instead of traditional income documentation does not mean the borrower can simply provide a few statements and receive automatic approval.

What Else Matters?

Income documentation is only one part of a mortgage application.

Depending on the program, lenders may also consider:

• Credit history
• Assets and reserves
• Down payment
• Property type
• Loan amount
• Debt obligations
• Occupancy
• Overall borrower profile

Is a Bank Statement Loan Right for You?

There isn’t one mortgage program that works for every self-employed borrower.

Some borrowers may qualify for conventional financing. Others may benefit from a Non-QM option such as a bank statement loan.

The key is to compare the available options based on your actual financial situation rather than choosing a loan simply because the documentation sounds easier.

Explore Your Options

If you’re self-employed and traditional income documentation doesn’t tell the full story, Point Capital Services can help you explore available financing options.

Tell our loan team about your situation, and we’ll help you understand which programs may be available to you.

Guidelines, rates, terms, credit requirements and availability vary by lender, borrower profile, property and loan program.