A bank statement loan is a non-QM mortgage for self-employed people. Instead of using the income on your tax returns, the lender looks at 12 or 24 months of your bank statements. Lenders typically add up the business deposits that count, divide by the number of months, and then take off a share for business costs. That share is often called an expense factor. What is left is your monthly income for the loan. A standard conventional loan, by contrast, uses the net income on your tax returns after write-offs. Bank statement loans usually cost more, and terms vary by lender.
This is one of the most common questions from business owners in Nashville and Franklin: "My business makes good money, so why does my tax return say I don't?" Write-offs lower your taxes. They also lower the income a standard loan can use. Bank statement loans were made for this gap.
| Standard conventional (Fannie Mae) | Bank statement loan (non-QM, typical) | |
|---|---|---|
| Income comes from | Signed federal tax returns, usually the last two years | 12 or 24 months of business or personal bank statements |
| Write-offs | Lower your qualifying income | Not used the same way; an expense factor is applied instead |
| Who sets the rules | Fannie Mae Selling Guide | Each lender |
| Cost | Usually lower | Usually a higher rate and larger down payment |
Here is a simple example to show the steps. The numbers are made up for illustration. Your lender's expense factor may be different.
| Step | Example |
|---|---|
| Business deposits that count, over 12 months | $240,000 |
| Divide by 12 months | $20,000 a month |
| Take off an example 50% expense factor | − $10,000 |
| Monthly income used for the loan | $10,000 |
Many lenders leave out deposits that are not business income, like transfers between your own accounts or loan money. Some lenders let a CPA or tax preparer write a letter that shows your real expense ratio. That can change the math.
Terms vary by lender. Non-QM loans are not set by a government agency. Each lender writes its own rules for credit, down payment, rates, and paperwork, and those rules change often. Always ask for the lender’s current guidelines in writing.
Many do not use tax returns to figure income. They use 12 or 24 months of bank statements instead. Each lender has its own paperwork list.
It is the share of your deposits a lender assumes went to business costs. The lender subtracts it to find the income it will use.
Many lenders accept business or personal statements. The math can be different for each, so ask how your lender handles them.
Usually, yes. Expect a higher rate and often a bigger down payment than a standard conventional loan.
Many lenders want about two years, but rules vary. Standard loans have their own rules. See our page on how long you need to be self-employed.
Often, yes. Many lenders treat 1099 contractors as self-employed. Some lenders also have programs that use your 1099 forms.
Self-employed in Middle Tennessee and want to compare a tax-return loan with a bank statement loan? Call me at (615) 495-6594, email travis@heathrowmtg.com, or start an application.
Checked October 14, 2026. The income example is simple math for illustration only. Bank statement loan rules are set by each lender. This is not a loan offer.
