How Bank Statement Loans Calculate Your Income (With a Worked Example)
How does the calculation work?
Choose the accounts. Personal statements, business statements, or sometimes both.
Choose the period. Twelve or 24 months, depending on the program.
Remove what isn’t income. Transfers between your own accounts, loan proceeds, refunds and unusual one-time deposits generally come out.
Apply an expense factor for business statements. Because deposits aren’t profit, the lender counts only a portion. A common approach is a percentage such as 50%, though it varies by lender, and a CPA-prepared profit and loss statement can support a different figure.
Divide by the number of months.
What does that look like?
Here’s an illustration with hypothetical numbers. It isn’t a quote.
| Business bank statements (12 months) |
Total deposits | $420,000 |
Less transfers and non-income deposits | $30,000 |
Eligible deposits | $390,000 |
Expense factor at 50% | $195,000 |
Qualifying income per month (divide by 12) | $16,250 |
Now compare that with the same borrower’s tax return. If the return shows $72,000 of net income after deductions, that’s $6,000 a month. Same business, very different qualifying number.
With personal statements, lenders often use eligible deposits without a separate expense factor. Programs differ, so confirm which rules apply.
What else do lenders look at?
• Time in business, commonly two years, though it varies
• Credit score and loan-to-value, which drive your down payment and pricing
• Reserves
• Your debt-to-income ratio, calculated on the qualifying income above
What causes trouble?
• Mixing personal and business money in one account
• Large unexplained cash deposits
• Frequent overdrafts
• Deposits that can’t be tied to real business activity
Clean statements, and a CPA who can explain your numbers, make a file much smoother. [LINK: mortgage planning for CPAs and financial advisors]
Is it a good deal?
It depends on the scenario, and it may cost more or less than a conventional loan you couldn’t get anyway.
Self-employed and told your income is too low? Explore self-employed and Non-QM loans
Illustration only. Requirements, expense factors and terms vary by lender and program. Not a commitment to lend.
Mike Belfor, Branch Manager and Mortgage Loan Originator, American Pacific Mortgage, NMLS 264700 (Company NMLS 1850). Equal Housing Opportunity. Updated September 18, 2026.
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