Bank Statement Loan Requirements and Qualifications

Bank statement loan requirements center on documents: a run of personal or business bank statements, proof that you are self-employed and that your business is active, a way to account for business expenses, and the same credit, asset and property review any mortgage gets. Exact standards, such as credit and down payment expectations, vary by program and change over time, so this guide focuses on what you will be asked to show and why. Every loan is subject to credit approval.

Why requirements vary from lender to lender

Bank statement loans are non-QM loans. They are not bought by Fannie Mae or Freddie Mac, so there is no single rulebook. Each lender works within guidelines set by the investors that buy its loans, and those guidelines differ. Programs vary by borrower, property and investor.

What does not vary is the legal baseline. Under the CFPB's ability-to-repay rule, a lender must make a reasonable, good-faith determination that you can repay, and it must verify income and assets with reliable third-party records. Bank statements and documents from a CPA or tax preparer are the kinds of records that support that determination.

1. Your bank statements

The statements are the core of the file. Expect a lender to ask for:

• A complete run of statements bank statement programs commonly review 12 or 24 months of personal or business statements. Every page of each statement, including pages that look blank, is usually required.
• Statements in their original form downloaded PDFs from your bank or bank-certified copies. Screenshots and spreadsheets typically are not accepted.
• The same account throughout, if possible switching accounts mid-period is workable, but you will need statements from each account to cover the full window.
• Account ownership on the statement your name or your business name should appear so the lender can tie the account to you.

If you have more than one business account, ask whether the lender can combine them and how it treats transfers between them.

2. Proof that you are self-employed

A lender needs to see that the deposits come from a real, active business that you own or control. Common documents include:

• A business license, if your type of work requires one.
• State registration or formation documents for an LLC or corporation.
• A letter from your CPA, enrolled agent or licensed tax preparer confirming that you are self-employed and how long the business has operated.
• Your ownership share, often shown in the formation documents or the CPA letter.
• A business website, listing or other evidence the business is operating, which some lenders verify on their own.

The lender may also call or verify your business by other means close to closing, similar to how employment is confirmed for a W-2 borrower.

3. A way to account for expenses

When you use business statements, the deposits show gross revenue, not profit. Lenders handle this in one of two ways. An expense factor is applied to business deposits, or a CPA- or tax-preparer-prepared expense letter is used to show your actual expense level. The expense factor is set by the program and can depend on your type of business and the number of employees.

If your real expenses are lower than the standard factor, an expense letter or a profit-and-loss statement may help your qualifying income. Ask the lender which options it accepts.

4. Credit history

Your credit report is reviewed much as it would be for any mortgage. Lenders look at your payment history, how much of your available credit you use, and any past bankruptcies, foreclosures or short sales. Non-QM programs set their own standards, which may be more flexible than agency guidelines in some areas, and your credit affects pricing as well as eligibility.

Check your credit reports before you apply so you can dispute errors early. If an item on your report is tied to a past hardship, a short written explanation can help the underwriter understand it.

5. Assets and reserves

You will need to document the funds for your down payment and closing costs, and often reserves that stay in your account after closing. Lenders typically ask for:

• Recent statements for checking, savings and investment accounts.
• An explanation and paperwork for large deposits, such as a sale of property or a transfer from another account you own.
• A gift letter and donor documentation if a family member is helping.
• A cash flow review if you plan to use business funds, to show that taking the money out will not hurt the business.

Lenders may expect a larger down payment and more reserves on non-QM loans than on agency loans. The exact expectation depends on the program and your file.

6. Debts and housing costs

The ability-to-repay rule requires lenders to consider your monthly debts and your housing costs, including property taxes, insurance and any condo or homeowners association dues. Gather statements for any other mortgages, auto loans, student loans and credit lines. If your business pays a debt that is in your name, have proof that the business makes those payments, since some lenders will exclude it with documentation.

7. Property documents

The home itself must meet the program's standards. For a purchase, you will need the signed contract. For a refinance, have your current mortgage statement, homeowners insurance declarations and, for a condo, association contact information. An appraisal is ordered by the lender.

8. Identity and authorization forms

Expect to provide a government-issued photo ID and to sign authorizations, which can include permission for the lender to request tax information from the IRS. Even when your statements are used for income, some lenders use that authorization to confirm filing status. The IRS form commonly used for this is Form 4506-C, which lets you authorize a lender to request your tax transcript through the IRS Income Verification Express Service.

Questions to ask before you apply

• Which review period does this program use, and can I choose between options?
• Will you use personal statements, business statements, or both?
• How will business expenses be calculated, and will you accept an expense letter or P&L?
• What do you need to see to confirm my business is active?
• Is there a prepayment penalty?

Put your answers next to each Loan Estimate you receive. The CFPB suggests requesting Loan Estimates from more than one lender and comparing origination charges, the APR and total costs.

A quick pre-application checklist

Before you call a lender, gather your full statements for the review period, your business license or state filing, a CPA or tax-preparer letter if you have one, statements for your down payment and reserve accounts, your photo ID, and a short written explanation of any large or unusual deposits. Having these ready can shorten the back-and-forth once underwriting begins.

Frequently asked questions

Next steps

• Bank Statement Loans
• P&L Loans
• Bank Statement Loans in Florida
• Bank Statement Loans in New York
• Bank Statement Loans in New Jersey
• Bank Statement Loans in Pennsylvania
• Bank Statement Loans in Connecticut
• Bank Statement Loans in Virginia

Sources

• CFPB: What is the ability-to-repay rule?
• CFPB: Regulation Z 1026.43, Minimum standards for transactions secured by a dwelling
• Fannie Mae Selling Guide: Depository Accounts
• IRS: Income Verification Express Service (IVES)
• CFPB: Loan Estimate explainer