Mortgage Glossary
Bank Statement Loan
A non-QM mortgage that qualifies self-employed borrowers on bank deposits, not tax returns — the canonical self-employed mortgage doc path.
What is a bank statement loan?
A bank statement loan is a non-Qualified Mortgage that calculates a borrower’s qualifying income from 12 or 24 months of bank statements rather than from W-2s, tax returns, or paystubs. It exists because self-employed borrowers, 1099 contractors, and business owners commonly take legitimate write-offs that reduce their reported taxable income well below their actual cash flow. A traditional Qualified Mortgage underwriter reads that taxable income and disqualifies the file; a bank statement underwriter reads the deposits and approves it.
There are two common analytical paths. The personal path uses 12 or 24 months of the borrower’s personal bank statements as the primary income source, with 2 months of business statements to confirm the source of those deposits. The business path uses 12 or 24 months of business statements with an expense ratio applied to determine net qualifying income — 50% fixed, a CPA/EA-attested ratio of at least 10%, or a third-party-prepared P&L.
Because this is non-QM, max DTI is generally higher than a Qualified Mortgage and LTV caps are program-specific. Bank statement loans are commonly used for primary residences, second homes, and (less often) investment properties.
How bank statement loans apply at Total Quality Lending
Total Quality Lending offers a bank statement doc path under Prime Time — up to 90% LTV on primary residence at 720+ FICO with ≤$1.5M loan amount. Both 12-month and 24-month options are available; the 24-month path is generally the cleaner approval. For self-employed investors buying rental property, the DSCR program is often a faster route since it skips borrower-income docs entirely.
FAQs
Who is a bank statement loan for?
Self-employed borrowers, 1099 contractors, gig workers, and business owners whose tax returns understate their true income because of legitimate business write-offs. The deposits in their bank statements reflect actual cash flow better than their net taxable income.
How many months of bank statements does TQL require?
TQL's Prime Time bank statement path uses either 12 or 24 months. Personal path: 12 or 24 months of personal statements plus 2 months of business statements. Business path: 12 or 24 months of business statements analyzed using a 50% fixed-expense ratio, a third-party expense ratio of at least 10%, or a third-party-prepared P&L.
Can a bank statement loan be used for an investment property?
On Prime Time, bank statement doc is available across primary, second home, and investment occupancies. For pure investment-property files where rental income covers PITIA, the DSCR program is often a simpler fit because it doesn't require any borrower income documentation at all.
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