Bank statement loans in IdahoA bank statement loan counts your income from your bank deposits, not from your tax return.

If you work for yourself, your tax return can make your income look smaller than it is, because the deductions that lower your tax also lower the income a lender sees on it. A bank statement loan works from your deposits instead: the lender reads your statements and builds your income from what came in. Lenders call it a non-QM loan, and the section on that term below says what it means.

ClearPath doesn't lend, and I'm not the lender on a bank statement loan. I place them with lenders who make them, and we can set one beside a conventional loan and decide together what fits. Nothing on this page is my terms or an offer. The ranges below are national ones, as lenders publish them.

Who it's for

Who a bank statement loan is for

These programs are built for self-employed people: business owners, independent contractors, freelancers and 1099 earners. Lenders commonly publish two years of self-employment, or two years in the same line of work, as where a file starts. Some programs go shorter, so a newer business is still worth a conversation.

They're offered for a home you live in, a second home and investment property, though not every program takes all three.

What the lender reads

12 or 24 months of statements, and what counts as income

Instead of your tax returns, the lender reviews 12 or 24 months of consecutive bank statements, personal, business or both, depending on the program, and works out your average monthly deposits.

Eligible deposits into a personal account are commonly counted at 100%. Business deposits are reduced by an expense factor, to allow for what the business costs to run, and 50% is the common default. A lower factor may apply with a letter from a CPA or another third-party preparer, and how low it can go depends on the lender.

An illustration, not a typical file: say the eligible deposits into a business account average $20,000 a month across the statements. At a 50% expense factor, a lender would count $10,000 a month as income.

What lenders commonly ask

Down payment, credit, reserves and loan size, as starting points

These are the ranges lenders commonly publish nationally. They're where a file starts, not my terms and not a bar you have to clear.

On a home you'll live in, 10% down is the commonly published starting point for stronger credit. Second homes and investment property ask more. Lenders treat gift money toward the down payment differently, so that's worth asking about early.

The minimum credit scores lenders publish run from 620 to 660, and a higher score generally lets you put less down. If yours is lower, tell me anyway, and we'll look at it with the rest of your file.

Lenders commonly ask for at least 3 months of the full mortgage payment in reserve, and more as the loan gets larger. Loans are commonly made from $150,000 up to somewhere between $3 million and $5 million.

Credit, savings and the size of the loan move together, and lenders weigh them differently, so they're worth looking at on your own file.

The price

What moves the price, without the numbers

Bank statement loans are generally priced higher than a conventional loan. Where yours lands depends on your credit, your down payment, the size of the loan and the program. I don't print a rate here, because the number that matters is the one in the disclosures on your own file.

Fixed rates are commonly published, and some programs offer adjustable rates, interest-only periods or a longer term than usual. How long the loan runs and what it costs month to month belong in the quote on your file, not on this page.

To see what a payment could look like, the Idaho mortgage calculator lets you put in a rate yourself. ClearPath doesn't publish one there either.

Non-QM

What non-QM means, and the CFPB rule behind it

Lenders call bank statement loans non-QM. That's the lenders' word, not the regulation's, for a mortgage that isn't a qualified mortgage.

The rule behind it is the CFPB's ability-to-repay rule. On a mortgage secured by your home, the lender has to make a reasonable, good-faith determination, at or before closing, that you'll have a reasonable ability to repay it according to its terms. It can base that on your current or reasonably expected income or assets, it has to verify the income it relies on with third-party records, and the rule's own examples of those records include financial institution records.

A qualified mortgage is one that meets the rule's requirements, and the lender on one is presumed to have followed the ability-to-repay rule. A qualified mortgage generally can't have an interest-only period, negative amortization, a balloon payment or a term longer than the rule allows, and the CFPB says the annual percentage rate on most can't be above a set threshold.

So on a loan secured by your home, non-QM doesn't switch the ability-to-repay rule off. The lender still has to make that determination, and the loan doesn't carry the qualified mortgage's presumption.

Beside the other ways

Beside a conventional loan on your tax returns

The reason these loans exist, as lenders tell it, is that deductions lower a self-employed borrower's taxable income, so the return can understate what the business brings in.

On the conventional side, Fannie Mae's guide documents a self-employed borrower's income from signed federal tax returns, personal and in some cases business, or from IRS transcripts, and it generally asks for a two-year history of earnings.

If your returns already show enough income, a conventional loan may suit you better, because bank statement loans are generally priced higher. Lenders also describe bank statement loans as allowing a higher debt-to-income ratio than a conventional loan, so the comparison can run either way on your numbers.

If the home is a rental rather than one you'll live in, some lenders offer the investor version as a separate, business-purpose loan, and a DSCR loan is one built to qualify on the property instead of on you.