Self-employed
Sole proprietors and single-member LLCs whose write-offs are doing their job a little too well, at least as far as a mortgage is concerned.
Bank statement loans for self-employed borrowers in Texas.
You run a real business. Your CPA did a great job, and your tax return now says you make about as much as a part-time lifeguard. A regular lender reads that return and gets nervous. A bank statement loan looks at the money that actually comes in. Here's how it works, the other ways to document income when tax returns don't tell the story, and what to send me.
Who it's for
Business owners
Owners of S corps, partnerships, and companies with complicated returns, K-1s, and income that runs through the business before it reaches you.
Gig and 1099 workers
Real estate agents, rideshare and delivery drivers, consultants, contractors, and anyone paid on a 1099 instead of a W-2.
Newer or uneven income
People whose income jumped recently, or swings from year to year, so a two-year average of tax returns undersells what's coming in now.
Ways to document income
Bank statements are the best-known option, but they aren't the only one. Here's the menu, from most common to the one we use when tax returns are fine after all.
- 12 or 24 months of personal bank statements The lender adds up the deposits into your personal account and averages them. Transfers between your own accounts don't count, and big one-time deposits need an explanation. Usually the most direct read of what you take home.
- 12 or 24 months of business bank statements The lender looks at deposits into the business account, then subtracts expenses. That's usually done with a standard expense factor, or with an expense figure from your CPA if your real expenses are lower. Good when you leave most of the money in the business.
- 1099-only Income comes from your 1099 forms instead of your full tax return, so Schedule C deductions don't drag the number down. Some programs apply an expense factor.
- P&L-only A profit and loss statement for the business, usually prepared or signed by a CPA, enrolled agent, or tax preparer. Who can sign it depends on the program.
- WVOE A written verification of employment. Your employer fills out a form with your pay history, and that replaces pay stubs, W-2s, and tax returns. For W-2 employees whose paperwork, not their income, is the problem.
- Full documentation, for comparison Tax returns, W-2s, and pay stubs, the regular way. Some expanded programs accept one year of returns instead of two. If full doc works, it usually wins on price, so I'll always check it first.
12 months or 24 months?
Twelve months of statements is faster to pull together and can work better if your income has grown recently, since an older, slower year isn't dragging the average down. Twenty-four months can open more options and can help if the last year was unusually slow. The right answer depends on your deposits, so send me both years if you have them and I'll run it both ways.
How lenders read your statements
What counts
Regular business deposits: customer payments, card processor deposits, client checks. The lender wants income that looks like it will keep coming.
What doesn't
Transfers between your own accounts, loan proceeds, refunds, and other money that isn't income. Those get backed out.
Large deposits
A deposit that's much bigger than usual gets questioned. Have a short explanation and the paperwork behind it ready.
Overdrafts
A few can be explained. A pattern of overdrafts or returned items makes underwriting nervous. If you have them, tell me up front.
The lender will also want to see the business is real and has been around a while: a business license, a CPA letter, a website, or similar. Two years of self-employment is the usual starting point, with some flexibility if you were in the same line of work before.
Loan amounts and property types
Bank statement and other alt-doc loans go up to $3.5 million, depending on the program, your credit, and the property. Above the conforming limit, that's also a form of non-QM jumbo loan. Single-family homes, townhomes, 2-4 unit properties, and condos are eligible, including some non-warrantable condos a conventional loan won't touch. Fixed and adjustable options are available, and interest-only options are available on some programs.
Credit events and seasoning
A foreclosure, short sale, deed-in-lieu, or bankruptcy doesn't automatically rule you out. What matters is how long ago it was and what your credit looks like since. Lenders call that seasoning. The best programs and terms generally open up once several years have passed. Some programs allow a more recent event with tighter terms. Conventional loans have their own set waiting periods, and non-QM can be more flexible. Send me the dates and the paperwork, and I'll tell you which doors are open now and which open later.
Reserves, explained
Reserves are money you still have after closing. Lenders measure them in months of your full house payment, including taxes, insurance, and HOA dues. They're a cushion: proof that a slow month for the business won't turn into a late mortgage payment.
Bigger loans need more months of reserves. Checking and savings count. Brokerage accounts usually count. Retirement accounts often count too, sometimes at a discount because of taxes and penalties if you had to pull the money out. Money in the business account can sometimes count, if pulling it out won't hurt the business. Plan on keeping the reserves in place through closing.
Tradeoffs vs a conventional loan
- Pricing Usually higher than conventional. That's the trade for flexibility.
- Cash to close Down payment and reserve requirements are often bigger than on a conventional loan.
- Paperwork of a different kind No tax returns, but every page of every statement, plus explanations for anything unusual.
- Not a way around affordability Federal ability-to-repay rules still apply. The lender has to make a good-faith determination that you can repay.
If your returns show enough income, a conventional self-employed loan is usually the better deal. Sometimes waiting until next year's return is filed gets you there. I'll tell you which way to go.
Self-employed around DFW
A lot of my bank statement borrowers run businesses around Fort Worth or out west in Aledo and Parker County: contractors, agents, medical practice owners, restaurant owners, and people who build things for a living. If that's you, I've probably seen a file like yours. Buying a rental instead of a home to live in? See DSCR loans.
What to send me
- 12 or 24 months of bank statements, all pages, personal or business
- Proof the business exists: a license, a CPA letter, or similar
- Your 1099s or P&L, if we're going that route
- Your last two years of tax returns, so I can check whether full doc works first
- Statements for the accounts you'll use for the down payment and reserves
- Where you're buying and roughly the price
How to start
Send the short form, call, or email. Tell me what the business does, how long you've owned it, how you pay yourself, and what you're buying. I'll tell you which documentation route fits and what I need next.
Phone: 817-873-6288
Email: [email protected]
Bank statement loan questions
What is a bank statement loan?
A bank statement loan is a mortgage that uses deposits on your bank statements, usually 12 or 24 months, to figure out your income instead of your tax returns. It's built for self-employed borrowers whose returns show less income than the business really brings in.
Personal or business bank statements: which is better?
Either can work. Personal statements usually count your deposits more directly. Business statements usually have an expense factor or a CPA-prepared expense figure applied, because some of the money going in has to go back out. Which comes out better depends on how you pay yourself.
Can I use 1099s instead of tax returns?
Yes. A 1099-only loan uses your 1099 forms to calculate income, so the deductions on your Schedule C don't shrink your qualifying income. Some programs apply an expense factor to the 1099 income.
What is a P&L-only loan?
A P&L-only loan uses a profit and loss statement for your business, usually prepared or signed by a CPA, enrolled agent, or tax preparer, instead of tax returns or bank statements. Who can prepare it depends on the program.
What is a WVOE loan?
A WVOE loan uses a written verification of employment, a form your employer fills out with your pay history, instead of pay stubs, W-2s, and tax returns. It's for W-2 employees whose paperwork is the problem, not their income.
How big can a bank statement loan be?
Up to $3.5 million, depending on the program, your credit, and the property.
I had a foreclosure or bankruptcy. Can I still get one?
Possibly. Credit events like a foreclosure, short sale, deed-in-lieu, or bankruptcy need time to season. The best terms usually come once several years have passed, and some programs allow less time with tighter terms. Tell me the dates and I'll tell you where you stand.
What are reserves?
Reserves are money you still have after closing, measured in months of your full house payment. Bigger loans need more months. Checking, savings, brokerage, and often retirement accounts can count.
Are bank statement loans more expensive than conventional loans?
Usually, yes. The flexibility costs something. If your tax returns already show enough income, a conventional loan is usually the better deal, and I'll check that first.
Subject to qualification and program guidelines. Not all applicants will qualify. Not a commitment to lend.
More programs in the non-QM loan guide, or the FAQ page. Or head back home.