Does your tax return accurately represent your business’s success? For most entrepreneurs, the answer is no. You strategically use deductions to lower your tax liability, which is a smart business move. Unfortunately, this can become a major roadblock when applying for a conventional mortgage. Bank statement loans offer a modern solution, shifting the focus from your tax documents to your actual cash flow. By analyzing 12 to 24 months of your bank deposits, lenders get a clear and realistic picture of your ability to afford a home. To get started, you need a partner who gets it. Here, we’ll review the best bank statement mortgage lenders and explain how to prepare a strong application.
Key Takeaways
- Use Your Cash Flow, Not Your Tax Returns: Bank statement loans let you qualify for a mortgage based on the actual deposits into your accounts over 12-24 months. This is a game-changer for self-employed borrowers whose tax write-offs don’t reflect their true financial strength.
- Prepare for a Higher Down Payment and Credit Score: Plan for a down payment of at least 10% and aim for a credit score above 650. In return, you’ll likely get to skip private mortgage insurance (PMI), saving you a significant amount on your monthly payment.
- Partner with a Lender Who Specializes in Self-Employment: Not all lenders are experienced with bank statement loans. Find a team that understands the nuances of entrepreneurial income and can offer a smooth, efficient process tailored to your unique financial situation.
What is a Bank Statement Mortgage?
If you’re self-employed, a freelancer, or a small business owner, you know that proving your income for a traditional mortgage can be a major headache. Your tax returns might show a lower income after all your business deductions, making it tough to qualify for the home loan you deserve. That’s exactly where a bank statement mortgage comes in. It’s a type of home loan that lets you use your personal or business bank statements—typically from the last 12 to 24 months—to show your true income instead of relying on W-2s or tax returns.
This approach gives lenders a much clearer and more realistic picture of your financial health, opening the door to homeownership for many entrepreneurs who might otherwise be shut out. It’s one of several flexible mortgage solutions designed for borrowers with non-traditional financial profiles. By focusing on your actual cash flow, these loans recognize the unique nature of running your own business and provide a practical path to securing financing for your dream home.
How Does It Work?
Instead of handing over a stack of tax returns, you’ll provide your lender with 12 to 24 months of bank statements. The lender’s underwriting team will then carefully review your deposits to calculate a consistent monthly income. They’re looking for a steady stream of cash flow that demonstrates you can comfortably handle your mortgage payments. This process allows them to verify your income based on the money actually coming into your accounts, not just the taxable income you report after business expenses and write-offs. It’s a straightforward way to show your financial stability.
Who Is It For?
Bank statement mortgages are a perfect fit for anyone whose income isn’t captured by a standard W-2. If you fall into one of the following categories, this loan could be the key to buying your home. It’s designed specifically for:
- Self-employed individuals
- Freelancers and gig economy workers
- Small business owners
- Entrepreneurs with new or growing ventures
- Real estate investors with multiple properties
Essentially, if you have a strong, consistent income but your tax returns don’t tell the whole story, a bank statement loan is built for you.
Perks for Self-Employed Borrowers
The biggest advantage of a bank statement mortgage is that it empowers you to qualify based on your actual cash flow. As a business owner, you’re smart about taking deductions to lower your tax liability, but that can unfortunately work against you with traditional mortgages. This loan program sidesteps that issue entirely. It allows you to demonstrate your true earning potential, which often leads to qualifying for a larger loan amount. It’s a financial tool that truly understands the entrepreneurial journey and rewards your hard work. When you’re ready to see what you qualify for, you can start your application with confidence.
The Best Bank Statement Mortgage Lenders
Finding the right lender is about more than just securing a loan; it’s about finding a partner who understands the nuances of your financial life. This is especially true for self-employed borrowers, whose income streams don’t always fit into a neat little box. For years, entrepreneurs, freelancers, and small business owners have faced hurdles with traditional mortgage applications that rely heavily on W-2s and pay stubs. A great bank statement lender cuts through that red tape. They look beyond standard paperwork to see the real story of your success, using your bank statements to verify a consistent and reliable income.
We’ve looked at some of the top lenders who specialize in helping self-employed individuals achieve their homeownership goals. Each one brings something different to the table, from highly personalized service to flexible loan terms and high borrowing limits. As you review these options, think about what matters most to you—whether it’s a dedicated loan officer who will guide you through every step, a streamlined digital process, or a lender with specific programs designed for your industry. This list will help you identify a lender who can turn your hard work into a new set of keys.
UDL Mortgage
While many lenders offer bank statement loans, UDL Mortgage stands out for its commitment to white-glove service. If you’re a self-employed borrower tired of feeling like just another number, their approach is a breath of fresh air. They specialize in creating custom mortgage solutions by taking the time to understand your unique business and income flow. Through their Elite Partner Program, UDL offers exclusive access to loan programs and preferred rates you won’t find elsewhere. This focus on building relationships means you get a dedicated partner committed to finding the perfect fit for your financial situation, making the entire process feel seamless and supportive.
CrossCountry Mortgage
For self-employed borrowers with big ambitions, CrossCountry Mortgage offers the flexibility to match. They provide bank statement loans of up to $3 million, making them a solid choice for purchasing higher-value properties. You can qualify using just 12 months of either personal or business bank statements, which simplifies the documentation process considerably. Their programs are versatile, covering everything from your primary residence to a vacation home or an investment property. This flexibility makes them a go-to lender for entrepreneurs who need a straightforward path to financing that accommodates a wide range of real estate goals.
Angel Oak Mortgage Solutions
Angel Oak Mortgage Solutions has built its reputation on serving borrowers with non-traditional income. They are experts in bank statement loans, offering amounts from $150,000 up to an impressive $4 million. What makes them particularly appealing is their flexible approach to income verification. They understand that business ownership isn’t always straightforward and are willing to work with partial business owners and others with complex income structures. If your financial picture involves multiple revenue streams or unique ownership arrangements, Angel Oak has the experience to handle it with confidence, making them a trusted choice for self-employed individuals.
North American Savings Bank
If you have a solid history of self-employment, North American Savings Bank could be a great fit. They require at least two years of self-employment and 12 months of bank statements to qualify. With loan amounts ranging from $175,000 to $1.25 million, they cater to a broad spectrum of homebuyers. NASB operates primarily online, offering a streamlined, digital-first experience that many busy entrepreneurs appreciate. While they have physical branches only in the Kansas City area, their online platform makes their bank statement loan programs accessible to borrowers across the country who are comfortable managing their mortgage process remotely.
Griffin Funding
Griffin Funding is another lender that specializes in bank statement loans for both home purchases and refinancing. They offer a clear and helpful way to calculate income, counting 100% of deposits from personal bank statements and 50% from business statements. This transparency can make it easier to estimate how much you might qualify for. For even more flexibility, Griffin Funding also accepts Profit and Loss (P&L) statements prepared by an accountant. This willingness to consider different forms of documentation makes them an excellent option for business owners who want multiple pathways to prove their income and secure financing.
How to Qualify for a Bank Statement Loan
If you’re self-employed, you know that proving your income for a traditional mortgage can feel like fitting a square peg into a round hole. Bank statement loans change that. The qualification process is designed for people like you—entrepreneurs, freelancers, and small business owners whose income doesn’t fit neatly onto a W-2. Instead of focusing on tax documents that might not show your full financial picture, this loan centers on your actual cash flow. It’s all about painting an accurate picture of your income, which is a huge relief for many borrowers.
This approach allows lenders to see your true earning potential, making homeownership more accessible. The process is straightforward, but it requires a different set of documents than you might be used to. Think of it as showcasing the health of your business through its daily transactions rather than just its year-end tax summary. Let’s walk through exactly what you’ll need to have in order so you can feel confident when you apply.
What Credit Score Do You Need?
To qualify for a bank statement loan, lenders are typically looking for a credit score of at least 650, though a score of 700 or higher will give you more options and better terms. Your credit score is a key piece of the puzzle because it gives lenders a snapshot of your financial habits and creditworthiness. A strong score demonstrates that you have a reliable history of managing your finances, which helps offset the non-traditional income verification. If your score isn’t quite there yet, focusing on paying down balances and making on-time payments can make a big difference.
How Much is the Down Payment?
For a bank statement loan, you should plan on a down payment of at least 10% of the home’s purchase price. Some lenders may allow you to borrow up to 90% of the home’s value, but putting down more can strengthen your application and potentially secure you a better interest rate. A larger down payment reduces the lender’s risk, showing them you have a significant personal stake in the property from day one. It’s a good idea to have these funds ready in your bank account well before you start your application.
How to Document Your Income
This is where bank statement loans really shine. Instead of providing W-2s or tax returns, you’ll use your bank statements to prove your income. Lenders will ask for 12 to 24 months of either personal or business bank statements. They’ll analyze your deposits to see a consistent and reliable cash flow that can support your monthly mortgage payments. This method allows your true earnings to be recognized, which is a major advantage for self-employed borrowers. At UDL, we offer several loan programs designed specifically for this purpose.
What to Know About Taxes
If you’re self-employed, you likely take advantage of business write-offs to lower your taxable income. While this is a smart tax strategy, it can make it difficult to qualify for a traditional mortgage where lenders look at your net income from your tax returns. Bank statement loans solve this problem by focusing on your gross deposits before deductions. This means your income is evaluated based on the money coming into your accounts, not what’s left after you’ve written off expenses. It’s a more realistic assessment of your ability to afford a home.
Which Business Documents Are Required?
Along with your bank statements, you’ll need to provide a few other key business documents. Be prepared to share a profit and loss (P&L) statement, which summarizes your business’s revenues and expenses. You may also need to provide your business licenses and a letter from your CPA verifying your self-employment status. Gathering these documents ahead of time will help streamline the process and show the lender that your business is stable and well-managed. When you’re ready, you can start your application with all your paperwork in hand.
Breaking Down the Costs and Terms
Getting a mortgage is a big financial step, and it’s important to understand exactly what you’re signing up for. Bank statement loans have their own unique structure, so let’s walk through the key costs and terms you can expect. This way, you can move forward with confidence, knowing all the details.
Interest Rates and APR
When you’re looking at bank statement mortgages, you’ll notice that the interest rates are generally higher than those for traditional home loans. Lenders see self-employed income as slightly less predictable than a W-2 salary, and the rate reflects that added risk. You can typically expect rates to be about 1% to 3% above the standard market rate. The Annual Percentage Rate (APR) is your best guide, as it wraps in the interest rate and other lender fees to show you the total cost of borrowing. This transparency helps you make a clear comparison between different loan offers.
Closing Costs and Fees
Just like with any mortgage, you’ll have closing costs to cover. For a bank statement loan, it’s also wise to prepare for a larger down payment. Most lenders will require a down payment of at least 10% to 20% of the home’s purchase price. This upfront investment shows the lender you’re financially committed and can also help you secure more favorable loan terms. At UDL Mortgage, we understand that closing costs can add up, which is why we created our Closing Cost Advantage program to help ease that financial burden for our clients.
How Much Can You Borrow?
Don’t let anyone tell you that non-traditional loans come with low borrowing limits. Bank statement mortgages are specifically designed for successful entrepreneurs, and the loan amounts reflect that. Many lenders allow you to borrow up to 90% of the home’s value, which is known as the loan-to-value (LTV) ratio. Depending on the lender and your financial profile, some bank statement loan programs offer financing up to $3 million or even more. This gives you significant buying power to find the right home for your success.
Will You Need Private Mortgage Insurance (PMI)?
Here’s a major advantage of bank statement loans: you typically don’t have to pay for Private Mortgage Insurance (PMI). On conventional loans, PMI is usually required if you put down less than 20%, and it can add a hefty sum to your monthly payment. This insurance protects the lender, not you. Because bank statement loans are structured differently, most of them waive the PMI requirement, even with a 10% down payment. This can save you a significant amount of money every month and thousands over the life of your loan.
How to Choose the Right Lender
Finding the right mortgage lender is like choosing a business partner for one of the biggest investments you’ll ever make. It’s not just about securing a loan; it’s about finding a team that understands your unique financial picture, especially when you’re self-employed. The right lender will see the story behind your bank statements, not just the numbers. They’ll communicate clearly, work efficiently, and offer the kind of support that turns a stressful process into a smooth one. As you compare your options, focus on these key areas to find a lender who truly has your back.
Find a Lender Who Understands Self-Employment
When you don’t have W-2s or traditional pay stubs, you need a lender who specializes in the financial lives of entrepreneurs. Bank statement loans are designed for self-employed borrowers, but not every lender has deep experience with them. Look for a team that won’t try to fit your unique income into a conventional box. They should understand the ebb and flow of business revenue and know exactly how to verify your income using bank statements. A lender who gets it will ask the right questions and make you feel confident, not confused. They’ll see your consistent deposits as proof of your ability to pay, recognizing the hard work you’ve put into your business.
Review Their Loan Programs
Once you’ve found a few lenders who work with self-employed buyers, take a closer look at their specific loan programs. Bank statement loans are a type of “Non-QM” loan, meaning they don’t have to meet the strict government-backed standards of conventional loans. This gives lenders more flexibility, but it also means programs can vary significantly. Check how many months of bank statements they require—most look for 12 to 24 months of consistent deposits. Also, ask about their down payment requirements, credit score minimums, and interest rates. The goal is to find a program that aligns perfectly with your financial situation and homeownership goals.
Check Their Processing Speed
In a competitive housing market, speed is everything. A slow lender can cause you to lose out on your dream home. From the very first conversation, pay attention to how responsive and organized the loan officer is. Do they answer your questions clearly? Do they outline a clear timeline for the application and underwriting process? A lender committed to efficiency will have a streamlined system to keep your application moving forward. At UDL Mortgage, we pride ourselves on our white-glove service and industry-leading speed, ensuring you can submit an application and get to the closing table without unnecessary delays.
Gauge Their Customer Service
A mortgage is a long-term relationship, so you want to work with a team you trust. Look beyond the interest rates and check out what past clients have to say. Reading testimonials and reviews can give you a real sense of the lender’s communication style and level of support. Do they have a reputation for being helpful and transparent? A great lender will guide you through every step, answer your calls, and celebrate with you on closing day. This is a huge milestone, and you deserve a supportive team to help you achieve it.
How to Prepare Your Application
Getting your application ready doesn’t have to be overwhelming. A little preparation goes a long way in making the process feel smooth and straightforward. By getting your financial house in order before you apply, you present the clearest possible picture to lenders and set yourself up for success. Think of it as building a strong foundation for your home loan.
Organize Your Financial Documents
First things first, let’s get your paperwork together. To ensure a smooth application process, you’ll need to gather and organize your key financial documents. Lenders will want to see your bank statements for the last two years to get a clear view of your financial stability and ability to handle a mortgage. This documentation is the primary way they verify your income and see your financial habits in action. Having everything ready to go from the start shows you’re a serious and organized applicant.
Follow Bank Statement Best Practices
When you’re relying on bank statements for your mortgage, it’s smart to follow a few best practices. Lenders typically review 12 to 24 months of your bank statements to confirm your income is consistent. What they’re really looking for are those “steady deposits” that show you can comfortably manage your monthly payments. The goal is to present a history of reliable income flowing into your accounts. This consistency is what gives a lender confidence in your ability to repay the loan.
Manage Your Business and Personal Accounts
If you’re self-employed, keeping your business and personal finances separate is a game-changer. Lenders will carefully review your statements for any red flags like “overdrafts, bounced checks, or inconsistent income.” Maintaining clean, organized accounts helps you present a much stronger financial picture. It shows that you manage your money responsibly, which is a huge plus. Think of it as spring cleaning for your finances—it makes everything easier to find and understand.
Plan Your Income Verification Strategy
For self-employed borrowers, a bank statement mortgage is a fantastic alternative to traditional income verification. Instead of relying on tax returns, these loans use your personal or business bank statements (usually 12 to 24 months) to demonstrate your true income. This approach often provides a more accurate reflection of your financial situation, especially if you have a lot of business write-offs. Understanding how this works allows you to plan your income verification strategy and choose the right loan programs for your unique needs.
Your Step-by-Step Application Guide
Getting a mortgage can feel like a huge undertaking, but breaking it down into clear steps makes it much more manageable. Here’s a look at the typical journey from submitting your application to getting the keys to your new home.
Step 1: Submit Your Documents
First things first, you’ll need to gather your financial paperwork. For a bank statement loan, this means providing your lender with your most recent personal and business bank statements, usually covering a period of 12 to 24 months. These documents are the cornerstone of your application, as they paint a clear picture of your income and financial habits for the lender. Think of it as telling your financial story. A good lender will guide you on exactly which documents are needed to start the process.
Step 2: Get Through Underwriting
Once you’ve submitted your documents, your application moves to underwriting. This is where a specialist reviews your file to verify your income and assess your ability to handle the mortgage payments. They’ll analyze the deposits in your bank statements to confirm a consistent and reliable cash flow. They’re also checking to see that you have enough money set aside for your down payment and closing costs. This step is all about ensuring the loan is a good fit for both you and the lender.
Step 3: Receive Your Approval
This is the exciting part. After the underwriter has thoroughly reviewed your file and confirmed that you meet all the requirements, you’ll receive your loan approval. This official green light means the lender is ready to fund your home purchase. You might receive a conditional approval at first, which just means you need to provide a few final items before getting the all-clear. Once those are handled, you’ll get the final approval and can move toward the finish line, just like so many of our happy clients.
Step 4: Close on Your New Home
Closing is the final step in your home-buying journey. You’ll meet to sign the final paperwork, which officially transfers the property ownership to you. This is also when you’ll pay your closing costs and down payment. A great lender, like our team at UDL Mortgage, ensures this process is smooth and transparent, so you know exactly what to expect. After all the documents are signed and the funds are transferred, you’ll receive the keys to your new home.
Smart Financial Moves for the Future
Securing your mortgage is a huge milestone, but it’s just one part of your financial journey. As a business owner, the habits you build now will set you up for long-term success. Think of your mortgage application as the perfect opportunity to get your financial house in order. By focusing on a few key areas, you can not only secure a great loan but also build a stronger financial foundation for whatever comes next. Here are some smart moves to make for your future.
Build Your Business Credit
With more self-employed borrowers entering the homebuying market, lenders are becoming more familiar with entrepreneurial finances. A great way to stand out is by building strong business credit. Separate from your personal credit score, your business credit history shows lenders that your company is a legitimate and financially responsible entity. Establishing a good record can make you a more attractive applicant and potentially help you secure more favorable loan terms. It demonstrates stability and a history of meeting your financial obligations, which is exactly what underwriters want to see. You can start by officially registering your business and getting a business credit card to build your credit profile.
Document Your Income Consistently
When you use a bank statement loan, your bank statements become the primary proof of your income. Lenders typically review 12 to 24 months of statements to verify that you have steady, reliable deposits to cover your monthly mortgage payments. Consistency is key. They are looking for a predictable pattern of revenue, not necessarily massive, one-off payments. Try to deposit your business income regularly to create a clear and easy-to-follow financial story. This simple habit makes it much easier for lenders to understand your cash flow and approve your application. Our team is experienced in working with unique income situations and can guide you through our various loan programs.
Explore Future Refinancing Options
A bank statement loan is an excellent tool for buying a home, but it doesn’t have to be your forever loan. Think of it as a strategic step into homeownership. As your business grows and your financial situation evolves, you may have opportunities to refinance in the future. Refinancing could allow you to secure a lower interest rate, shorten your loan term, or tap into your home’s equity. At UDL Mortgage, we believe in building long-term relationships. Our Lifetime Saver Program is designed to help our clients with their refinancing needs down the road, ensuring you always have a financial strategy that fits your life.
Manage Your Financial Risks
Lenders will carefully examine your bank statements for any red flags, such as overdrafts, bounced checks, or inconsistent income. These can signal financial instability and make it harder to get approved. Before you apply, take some time to clean up your accounts. Maintain a healthy buffer in your business account to avoid overdrafts and ensure all your transactions are clear and professional. This demonstrates that you are a responsible borrower who manages money well. By presenting a clean financial record, you show lenders that you are a low-risk applicant, which can make all the difference in getting your loan across the finish line. For more tips, you can always learn more on our blog.
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Frequently Asked Questions
How do lenders actually calculate my income from my bank statements? Lenders typically analyze 12 to 24 months of your bank statements to establish a dependable monthly income figure. If you’re using personal statements, they’ll often add up all the deposits and divide by the number of months to get an average. For business accounts, they might use a percentage of the deposits, like 50%, to account for business expenses. The goal is to create a clear and consistent picture of your cash flow that shows you can comfortably afford the mortgage payment.
Is a bank statement loan my only option if I’m self-employed? Not at all, but it’s often the most sensible one if your tax returns don’t reflect your true earning power. Many entrepreneurs are excellent at using deductions to lower their tax liability, which is a smart business move. The downside is that this can make it difficult to qualify for a traditional loan. A bank statement loan is specifically designed to solve this problem by focusing on your actual cash flow instead of your taxable income.
Will my interest rate be significantly higher than a traditional mortgage? You can expect the interest rate on a bank statement loan to be slightly higher than a conventional loan. Lenders view non-traditional income verification as carrying a bit more risk, and the rate reflects that. However, it’s important to look at the whole picture. Many of these loans don’t require Private Mortgage Insurance (PMI), which can save you a substantial amount each month and often helps offset the higher rate.
Can I use a bank statement loan for something other than my primary home? Yes, absolutely. These loans are quite versatile and are not limited to just the home you live in. Many lenders offer bank statement programs for purchasing second homes, vacation properties, and investment properties. This makes them a powerful tool for entrepreneurs who are looking to build wealth through real estate but need a flexible way to secure financing.
What’s the biggest mistake to avoid when preparing my bank statements for an application? The most common mistake is submitting statements that look messy or inconsistent. Lenders are looking for stability, so things like overdraft fees, bounced checks, or large, unexplained cash deposits can raise red flags. In the months before you apply, focus on maintaining a healthy account balance and depositing your income regularly to create a clean, predictable financial story.
