A bank statement loan is a type of mortgage designed for self-employed borrowers, freelancers, and business owners who may not have traditional W-2 income or tax returns that accurately reflect their earnings. Instead of using tax returns, lenders evaluate 12 to 24 months of personal or business bank statements to determine income. This allows borrowers to qualify based on their actual cash flow, rather than taxable income, which is often reduced due to business write-offs.

For business bank statement loans, lenders typically apply an expense ratio—either a fixed percentage (often 50%) or a CPA-verified percentage—to estimate net income. For personal bank statement loans, 100% of eligible deposits may be considered. Large deposits and transfers may require explanation, and a minimum of 25% ownership in the business is usually required.

Bank statement loans offer higher loan amounts (up to $3.5 million), up to 90% loan-to-value (LTV) with no private mortgage insurance (PMI), and flexible debt-to-income (DTI) ratios up to 55%. These loans provide a practical alternative for self-employed borrowers who have strong cash flow but struggle to qualify for traditional mortgages due to tax deductions.​

To qualify for a self-employed loan, borrowers must demonstrate their ability to repay the mortgage using alternative income documentation rather than traditional W-2s and tax returns. Lenders typically offer multiple ways to verify income, including 12 to 24 months of personal or business bank statements, 1099 income statements, or a CPA-prepared Profit & Loss (P&L) statement. Some programs also allow asset utilization, where a borrower’s liquid assets are divided over a set period (e.g., 84 months) to calculate qualifying income.

In addition to income verification, lenders consider credit score, loan-to-value (LTV) ratio, debt-to-income (DTI) ratio, and cash reserves:

• Credit Score: Minimum 660-700, depending on the program.
• LTV Ratio: Borrowers can qualify with as little as 10% down (90% LTV).
• DTI Ratio: Maximum 50-55%, depending on the documentation type.
• Reserves: Typically 6 to 12 months of mortgage payments may be required.

For real estate investors, Debt Service Coverage Ratio (DSCR) loans allow qualification based on rental income covering the mortgage payment, with no personal income verification required. Borrowers should also be able to show consistent cash flow, a minimum of 2 years in business, and proof of business existence via a license, CPA letter, or state registration. These flexible qualification options make self-employed loans ideal for entrepreneurs, freelancers, and small business owners who don’t fit traditional mortgage guidelines.

Most self-employed mortgage programs require borrowers to have been self-employed for at least two years to qualify. This can be verified through business bank statements, a CPA letter, a business license, or state registration. However, some programs offer flexibility:

• 1-Year Self-Employment Option: Certain loan programs allow borrowers with only one year of self-employment to qualify if they have prior experience in the same industry. For example, if you recently transitioned from a W-2 job to self-employment in a similar field (e.g., a contractor who became an independent consultant), you may qualify using one year of tax returns or 12 months of bank statements.
• Recently Switched from W-2 to 1099: Borrowers who recently switched to independent contractor status but have at least two years of total industry experience may qualify with a CPA letter or employer verification.

For Debt Service Coverage Ratio (DSCR) loans, which are used by real estate investors, there is no self-employment requirement, as qualification is based on rental income covering the mortgage payment.

Overall, two years of self-employment is the standard requirement, but certain programs offer 1-year self-employment options for borrowers with strong industry experience​.

Applying for a self-employed loan is easy and starts with getting pre-approved. Simply click the “Get Pre-Approved Today!” button to begin your application. This is the fastest way to start the process and determine your eligibility.

Once you start your application, you’ll need to provide alternative income documentation, such as 12 to 24 months of bank statements, 1099 income statements, or a CPA-prepared Profit & Loss (P&L) statement instead of traditional W-2s and tax returns. You may also need to verify your credit score, assets, and business existence (via a business license, CPA letter, or state registration).

Our team will review your information and help match you with the best loan program based on your income, credit profile, and loan needs. Whether you’re looking to purchase a home, refinance, or invest in real estate, our self-employed mortgage options offer flexible qualification requirements to fit your financial situation. Click “Get Pre-Approved Today!” to get started!