Guide for self-employed buyers
Bank statement loans in Texas
If you work for yourself, your tax returns often show less income than you actually bring in, because write-offs do their job. A bank statement loan qualifies you on your real deposits instead. Here's how it works, what you need, and when a conventional loan is still the better deal.
What a bank statement loan is
A bank statement loan is a mortgage for self-employed buyers that uses 12 or 24 months of bank statements to prove income instead of tax returns. The lenders I work with offer both.
It's a non-QM loan, short for non-qualified mortgage. That doesn't mean it's risky or loose. Lenders still have to verify that you can afford the payment under federal ability-to-repay rules; they just use different paperwork to do it. Because Fannie Mae and Freddie Mac don't buy these loans, each lender sets its own terms, which is why shopping lenders matters even more here.
It's a good fit for business owners, contractors, real estate agents, freelancers and 1099 workers whose tax returns undersell what they earn. Here's a law firm owner I helped buy three homes in three months this way.
How your income is figured
The lender adds up your deposits over 12 or 24 months and takes the monthly average. What counts:
- Business statements: the lender assumes part of your deposits go to business expenses, called the expense factor. A common default is 50%. A letter from your CPA or tax preparer showing lower actual expenses can raise your qualifying income.
- Personal statements: deposits from your business can count in full, since expenses were already paid on the business side.
- What doesn't count: transfers between your own accounts, loans, refunds and other one-time deposits.
| Average monthly business deposits | $20,000 |
|---|---|
| Expense factor | 50% |
| Qualifying monthly income | $10,000 |
An illustration only. Your expense factor, eligible deposits and qualifying income depend on your business, your statements and the lender.
That qualifying income then works like any other: the lender compares it with your new payment and other debts.
What you need to qualify
- Credit: 620 or higher with the lenders I work with. Higher scores get better pricing.
- Down payment: typically starts around 10% for a home you'll live in with strong credit, and more with lower scores or for a rental.
- Time in business: usually about two years of self-employment.
- Savings after closing: most lenders want a few months of payments in reserve.
Every lender's grid is different, so I'll run your file against several and show you the trade-offs between rate, down payment and 12 vs 24 months.
Bank statement or conventional?
If your tax returns show enough income, a conventional loan almost always costs less. A bank statement loan makes sense when:
- Write-offs bring your taxable income too low to qualify for the home you want.
- Your income has grown recently and your last two tax returns don't show it yet.
- You haven't filed this year's return and don't want to wait.
A common game plan: buy now with a bank statement loan, then refinance into a conventional loan once your returns catch up. My affordability calculator helps you see what payment fits your budget first.
Buying a rental instead? A DSCR loan qualifies on the property's rent and skips your income entirely.
What to have ready
- 12 or 24 months of complete bank statements, every page.
- Proof you own the business, such as a business license, CPA letter or state filing.
- Two months of statements for the account your down payment and reserves come from.
- A letter from your CPA or tax preparer about business expenses, if it helps your numbers.
Not sure which months tell your best story? Send me what you have and I'll look before anything goes to a lender.
Common questions
What credit score do I need for a bank statement loan?
The lenders I work with start at 620. A higher score usually means a lower rate and a smaller required down payment, so it's worth knowing where you stand before you apply.
Can I use personal bank statements instead of business statements?
Usually, yes. Many lenders accept either. Personal statements can count more of your deposits as income, but the deposits have to trace back to your business, not transfers between your own accounts.
How long do I need to be self-employed?
Most lenders want about two years of self-employment. Some will consider less if you were in the same line of work before going out on your own.
Is the rate higher than a conventional loan?
Usually, yes, because these loans can't be sold to Fannie Mae or Freddie Mac. Many owners use one to buy now and refinance into a conventional loan later, once their tax returns show enough income.
Can I use a bank statement loan for a rental property?
Yes. Bank statement loans can buy a primary home, second home or rental. If the purchase is a rental, a DSCR loan, which qualifies on the property's rent instead of your income, may be simpler.
Want me to run your numbers?
I'll compare lenders and show you what you'd pay. No cost to talk.
Applying takes 10–15 minutes online. I usually pull credit within 24 hours, unless you'd like me to wait.
Stuck on a term? See the plain-English mortgage glossary.
Sources
This guide is general education, not a loan offer or legal or tax advice. Program rules, fees and limits change; I check them against the sources above when this page is reviewed. Eligibility depends on your situation, and not all applicants will qualify.