Homebuyers

Bank Statement Loans: How Self-Employed Borrowers Can Get a Mortgage

Being your own boss offers flexibility and independence, but it can also make getting a mortgage much more complicated.

If you’re self-employed, a freelancer, a gig worker, or a small business owner, you may not have the traditional income documentation lenders typically require. Through strategic tax deductions (business write-offs), your income may even appear too low to qualify for a mortgage.

That’s where bank statement loans come in.

“I have worked with several self-employed buyers in South Florida who earned a good income,” said Realtor Alexei Morgado, founder and CEO of Lexawise, a real estate exam prep company. “[But] their tax returns showed very low net income after deductions.”

“For them, loans based on bank statements were the most realistic option,” he said.

Below, we’ll look at what bank statements are and who they’re for, review their eligibility requirements, and consider some of the risks involved.

What is a bank statement loan?

A bank statement loan is a type of mortgage that primarily relies on one to two years of bank statements to determine your eligibility for a mortgage. The statements are used instead of income documentation such as pay stubs, W-2s, or tax returns.

Bank statement loans are a type of non-qualified mortgage, meaning they don’t have the same standard protections as qualified mortgages.

Qualified mortgages typically offer lower mortgage rates, according to the Consumer Financial Protection Bureau (CFPB). They also can’t include risky loan features, such as negative amortization (when your payment doesn’t cover all the interest due) and balloon payments (a large, lump sum that comes due.)

It should be noted that most non-QM loans today, including those that use bank statements to qualify, do not include these risky features due to federal and state lending rules.

Many Conventional loans and government-backed loans are qualified.

Bank statement loans for self-employed borrowers

A key provision of qualified mortgages is that the lender must “make a good-faith effort” to ensure you can repay the loan. Since that involves verifying stable income via pay stubs and tax returns, that may make it challenging for entrepreneurs, freelancers, and other self-employed individuals to qualify.

Instead, these borrowers may turn to bank statement loans to get approved. These and other non-QM loans are growing increasingly popular in recent years, according to mortgage technology provider Optimal Blue. They doubled in volume from 2023 to 2025.

That’s not surprising given the quickly rising rate of self-employment. Full-time self-employment reached its highest level in 2025, per the Small Business & Entrepreneurship Council. As a result, more borrowers are turning to bank statement loans to make homeownership a reality.

Bank statement loan requirements

Although bank statement loans allow you to get approved for a mortgage without a W-2 or pay stubs, you will have to meet some other strict mortgage requirements:

Financial statements and business documentation for bank statement loans

As you’d imagine, you need to provide bank statements from the past one or two years (varies by lender). Those bank statements need to reflect steady deposits from your business, such as client payments or business dividends.

Ideally, the bank statements should demonstrate that you take in more money than you spend.

You may also need to supply other business documentation, such as your business license, profit & loss statements, and tax documents.

“There are so many flexible ways to qualify a self-employed borrower,” said Daniel Arias, a New American Funding branch manager based in Pasadena, Calif. “Depending on how the client is billing and receiving their income, we can look at either 12 to 24 months of business bank statements or review a one-year profit & loss statement.”

Credit score required for a bank statement loan

Requirements will vary by lender, but many require a minimum 620 credit score for a bank statement loan.

“As is with all mortgage loan programs, maintaining a healthy credit history ensures we can offer the best interest rate possible,” advised Aria.

Down payment and cash reserves for a bank statement loan

To reduce risk for the lender, they typically require a larger down payment than you would need for qualified mortgages. Expect to put between 20% and 30% down.

In addition to money for the down payment, lenders may want to see adequate cash reserves. That should be enough money to cover the mortgage for several months.

Loan-to-value (LTV) ratio for a bank statement loan

LTV requirements are also stricter with bank statement loans. Lenders typically cap this at 75% to 80%. (This is the loan amount divided by the property’s value.)

Debt-to-income (DTI) ratio for a bank statement loan

While it varies by lender, many cap the DTI ratio at 43%. This looks at your debt compared to your income.

“Consistency is what determines the success or failure of the application in these cases. A few months of low income or large, unexplained income can quickly reduce the income considered for loan approval,” said Morgado.

“The clearest approvals I’ve seen have come from self-employed individuals who maintained a dedicated business account and a documented record that matched their history,” he said.

Potential risks of bank statement loans

Our perception of job security has changed in recent years, with more Americans trading traditional employment for self-employment amid the growing threat of layoffs.

However, the mortgage system still views traditional W-2 employment as more stable than self-employment, even if you run a successful small business and make good money.

This reality limits your mortgage options when you’re self-employed. While bank statement loans make homeownership possible for entrepreneurs and business owners, they have some downsides to keep in mind:

• Higher interest rates: Mortgage rates for non-QM loans are typically half a percentage point to two percentage points higher than traditional mortgage rates. This increases the cost of borrowing.
• Potentially longer loan terms: Some bank statement loans may last longer than 30 years. This can further increase costs in the long term.
• More cash needed: You may need to spend more of your savings on your down payment. This exposes you to risk if emergencies arise soon after you buy the home and your cash reserves are more limited than you’d like.
• Read the fine print: Some non-QM loans may include stipulations that are different from traditional mortgages. That’s why it’s important to fully understand your payment structure before taking out one of these loans.

Daniel Arias NMLS #461805