FAQs

A Bank Statement loan is a Non-QM mortgage designed for self-employed borrowers who may not qualify using tax returns.

Rather than relying solely on taxable income, eligible borrowers qualify using deposits reflected on personal or business bank statements while still meeting Ability-to-Repay requirements.

Why it matters:

Many successful business owners reduce their taxable income through legitimate business deductions. While that may limit their options with conventional financing, Bank Statement loans allow eligible borrowers to qualify using documented cash flow that better reflects how they earn income today.

Bank Statement financing may be appropriate when your borrower:

• Writes off significant business expenses
• Has strong cash flow but low taxable income
• Recently expanded their business
• Is a business owner, consultant, contractor, or freelancer
• Doesn’t qualify conventionally despite strong financials

Broker Tip:

If the borrower says, “My CPA writes everything off,” it’s usually worth evaluating a Bank Statement option.

To qualify under the Bank Statement program:

One of the first decisions is determining which documentation produces the strongest income.

Business Bank Statements

Business statements are often the better solution when revenue remains in the business account.

Multiple business accounts may be used provided the same calculation method is applied consistently.

Luxury Mortgage allows either 12 or 24 months of bank statements depending on the scenario.

Choosing the right documentation period can significantly impact qualifying income.

Consider:

• Is income increasing?
• Was there a recent business expansion?
• Were there unusual deposits?
• Which period provides the strongest average monthly income?

This is one of the easiest ways to structure the loan for success.

One of the biggest advantages of Luxury Mortgage’s program is the flexibility available for calculating self-employed income.

Method 3 –

CPA Expense Ratio Letter

A CPA may certify the borrower’s actual business expense ratio.

Luxury Mortgage allows expense factors as low as 10%, which can significantly improve qualifying income for low-overhead businesses.

A well-prepared Bank Statement loan can move through underwriting more efficiently. Taking a few extra minutes to review the file before submission can help reduce conditions and keep your loan on track.

Below are some of the most common items underwriters review and what you can do to prepare your file.

Review the Income Trend

Bank statements should reflect a stable or increasing income trend. If deposits show a noticeable decline or irregular pattern, underwriting may request additional documentation or an explanation. Reviewing the statements before submission can help identify potential concerns early.

Broker Tip: If the borrower experienced a temporary slowdown due to seasonality, business expansion, or another explainable event, include a Letter of Explanation with your initial submission.

Identify Large or Unusual Deposits

Underwriters review deposits to determine which represent recurring business income. Large or unusual deposits that fall outside the borrower’s normal deposit pattern may require additional documentation before they can be included in the income calculation.

Examples may include:

• Sale of equipment
• Insurance proceeds
• Personal loans
• One-time client payments
• Transfers between accounts

Broker Tip: Review the statements with your borrower before submitting the loan. If a deposit stands out, provide supporting documentation upfront whenever possible.

Separate Income from Transfers

Transfers between personal accounts are generally not considered qualifying income. Underwriters are looking for actual business revenue, not money moving from one account to another.

Broker Tip: Clearly identify recurring business deposits and avoid relying on transferred funds to support qualifying income.

Review NSF Activity

Occasional Non-Sufficient Fund (NSF) occurrences do not automatically disqualify a borrower, but they are reviewed during underwriting.

Luxury Mortgage allows:

• Up to 12 NSF instances when reviewing 12 months of statements
• Up to 24 NSF instances when reviewing 24 months of statements

If more than three NSF occurrences are present, a Letter of Explanation is generally required.

Broker Tip: Address NSF activity before submission rather than waiting for underwriting to request an explanation.

Verify Business Ownership

Bank Statement loans require that at least one borrower owns 25% or more of the business generating the qualifying income.

Before submitting, confirm that ownership documentation supports the file.

Examples may include:

• Business license
• CPA letter
• Operating agreement
• Corporate documents

Choose the Right Income Calculation Method

One of the biggest advantages of the Bank Statement program is the flexibility in calculating income.

Depending on the borrower’s business, one documentation method may produce a stronger qualifying income than another.

Available options include:

• Uniform Expense Ratio
• CPA Expense Ratio Letter
• CPA-Prepared Profit & Loss Statement

Choosing the appropriate method before submission can make a significant difference in qualifying income.

Include Supporting Documentation

Providing complete documentation with the initial submission can help reduce underwriting conditions.

Depending on the file, consider including:

• CPA letter (if applicable)
• Profit & Loss statement
• Business ownership documentation
• Rental documentation (if using rental income)
• Letters of Explanation
• Documentation supporting large deposits

For many self-employed borrowers, tax returns don’t tell the full financial story.

Bank Statement loans provide another path to homeownership by evaluating real cash flow while maintaining responsible underwriting standards. They also give brokers an opportunity to serve business owners, entrepreneurs, and independent professionals who may otherwise believe financing isn’t possible.