How income is calculated on a bank statement loan

Short answer

On a bank statement loan, the lender adds up your eligible deposits over 12 or 24 months, divides by the number of months, and, if the statements are from a business account, subtracts an expense factor, commonly 50%, to arrive at your qualifying monthly income. Example: $480,000 in business deposits over 24 months is $20,000 a month; with a 50% expense factor the lender counts $10,000 a month. Transfers between your own accounts, loan proceeds, and large one-time deposits are excluded, and no tax returns are used.

Why self-employed buyers use bank statements

Fannie Mae and FHA qualify self-employed borrowers on tax returns, generally two years, using the net income after deductions. If you run a business well, you take every legal deduction, and the net income on your Schedule C or K-1 can be a fraction of the cash that actually flows through your account. A bank statement loan is a non-QM program that looks at the cash instead. It is not a stated-income loan; the lender verifies every deposit.

Who uses them in Miami: contractors, realtors, restaurant and salon owners, truck owners, consultants, medical practices, and anyone paid on 1099s. Lenders generally require two years of self-employment, verified by a business license, CPA letter, or Sunbiz registration. See bank statement loans.

Step 1: Pick 12 or 24 months, personal or business

• 24 months gives the lender a longer view and usually the best pricing. It also smooths out a slow season.
• 12 months works when the last year was much stronger than the one before, or when the business is newer. Some lenders price 12-month programs a little higher.
• Personal statements: deposits are usually counted at 100% because your business expenses were already paid before the money reached you. Lenders typically want to see the business pays you regularly and may ask for two months of business statements to confirm.
• Business statements: deposits are counted after an expense factor (next step), because the gross deposits include money you spend on payroll, materials, and rent.
• Mixed accounts that take both business and personal deposits are treated as business accounts by most lenders.

Step 2: The expense factor on business accounts

The expense factor is the lender's estimate of what share of your gross deposits goes to running the business. There are three common ways to set it:

• Standard 50%. The default at many lenders: half of deposits are treated as expenses, half as income. Simple, no extra documents.
• CPA or tax preparer letter. Your accountant states the business's actual expense ratio, for example 30%. Lenders usually set a floor (often 10% to 20%) and may compare the letter to your industry.
• Profit and loss statement. Some lenders use a 12- or 24-month P&L prepared by a CPA and require that the deposits support a set percentage of the P&L gross revenue. See profit and loss loans.

Lower expense factors mean more qualifying income, so a service business with few costs (consulting, real estate sales) often qualifies for far more with a CPA letter than with the flat 50%.

Step 3: Which deposits count, and which do not

The underwriter reads every page of every statement. Deposits that count: customer payments, card processor settlements (Square, Stripe, Clover), checks from clients, Zelle or wire payments from customers, and regular owner draws into a personal account.

Deposits that are excluded or need an explanation:

• Transfers from your other accounts. Moving money from savings to checking is not income. Lenders back these out, which is why they often ask for the statements of the account the transfer came from.
• Loan proceeds. SBA, line of credit, merchant cash advances, or a car loan payoff deposit.
• Large irregular deposits. Anything well above your normal pattern (many lenders flag deposits over 50% of the monthly average) needs a paper trail: an invoice, a contract, or a sale document.
• Cash deposits. Counted by some lenders if consistent with the business type, excluded by others.
• Refunds, returned items, and reversed charges.

The lender also watches for overdrafts and negative balances. More than a few NSF items in 12 months can disqualify the file or lower the LTV.

Worked example: a Doral contractor

Business checking, 24 months of statements. Total deposits: $612,000. The underwriter removes $48,000 in transfers from savings and a $24,000 equipment loan deposit, leaving $540,000 in eligible deposits.

• Monthly average: $540,000 / 24 = $22,500.
• Standard 50% expense factor: $22,500 x 0.50 = $11,250 qualifying income.
• With a CPA letter stating a 35% expense ratio: $22,500 x 0.65 = $14,625 qualifying income.

At a 45% debt-to-income ratio, the difference between the two is about $1,500 more per month available for housing and debts, which can be the gap between a $600,000 house and a $750,000 house in West Kendall. This is why we ask about your real expense ratio before we pick a lender.

Add other verified income if you have it: a spouse's W-2, rental income with leases, or Social Security. Co-borrowers can mix documentation types at many lenders.

What else the lender requires

Bank statement programs are non-QM, so each lender sets its own rules. Typical requirements across our lenders as of October 2026: two years of self-employment, a credit score of 620 or higher with better pricing above 700, a down payment of 10% to 20% on a primary residence and more on second homes and investment properties, and reserves of a few months. Rates run higher than agency loans and vary daily; call 305-425-1990 for today's pricing.

If your deposits are too lumpy or your business is under two years old, ask about a one-year tax return loan, a WVOE loan, or a DSCR loan for an investment property.

QMS Lending is an independent mortgage broker in Doral, FL (NMLS #1781090), founded in 2018, with access to 100+ lenders. All loans are subject to credit approval and program guidelines. Rates vary daily; call 305-425-1990 for today's pricing. Equal Housing Opportunity.