Bank Statement: Ideal for self-employed borrowers with strong credit whose tax returns don’t accurately reflect their true earning potential or ability to afford a luxury home.
Even though many homeowners could qualify for a conventional mortgage with full documentation, a large number still don’t meet Fannie Mae and Freddie Mac underwriting guidelines. For those non-traditional borrowers, Non-QM loans — especially bank statement programs — provide a practical alternative.
Self-employed borrowers are often allowed to write off substantial business expenses under IRS rules. While this reduces their taxable income (and their tax liability), it can also make it appear on paper that they earn less than they actually do — sometimes even showing a loss for the year. A Bank Statement Non-QM loan solves this problem by qualifying the borrower based on real cash flow shown in personal or business bank statements, rather than tax returns, allowing them to obtain financing that better reflects their true income.
This program is intended for self-employed borrowers who need an alternative to traditional income documentation. Instead of providing tax returns, borrowers can qualify using personal and/or business bank statements to demonstrate actual cash flow.
To be eligible, at least one borrower must be self-employed for a minimum of 2 years and must own at least 25% of the business. This ownership requirement is used to confirm self-employment status.
For agency loans, this is typically supported by K-1s or Schedule G; for Non-QM loans, a CPA letter is generally required to verify ownership.
Income is typically calculated by averaging eligible deposits over the most recent 12–24 months of bank statements and applying an expense factor to determine qualifying income.
Most Non-QM investors apply a standard expense ratio (often around 50%). However, if a CPA can provide a letter explaining that the business operates with lower overhead, a reduced expense factor may be considered on a case-by-case basis.
Contact our team for a complimentary income review before submitting the loan so we can help structure it correctly for your client.
Information shown is for general reference and may vary by borrower qualifications and program terms. This is not a commitment to lend. Contact us for full loan details and eligibility requirements.
