In our last post, we introduced Pacific Home Loans’ Bank Statement Mortgage Program, a solution built for self-employed borrowers, freelancers, and real estate investors who don’t fit the mold of traditional lending. Now that you’re familiar with what a bank statement loan is, let’s take a deeper look at how it actually works step by step.
A stunning backyard like this can be yours—even without traditional income—thanks to our flexible Bank Statement Mortgage solutions.
How Lenders Use Bank Statements to Verify Income
Unlike traditional loans that rely on tax returns or W-2s, the Bank Statement Mortgage Program uses 12 or 24 months of your personal or business bank statements to determine income. Here’s how that process typically works:
- Bank Statements Review Period
Borrowers choose either 12 or 24 months of consecutive bank statements. Business statements are most commonly used for entrepreneurs, while personal statements may be suitable for freelancers or 1099 contractors. The longer the statement period, the more stable your income profile appears to lenders and this typically translates to a discount on the interest rate offered.
- Monthly Income Calculation
Lenders calculate a monthly income average based on total eligible deposits. For business accounts, an expense factor, usually between 50% to 70%, is applied to account for business costs. For personal accounts, all qualifying deposits can often be counted as income, assuming they’re consistent.
- Supporting Documentation
While tax returns aren’t required, borrowers may need to provide additional documents, such as a profit & loss statement (P&L), business license, or CPA letter confirming self-employment status and expense ratios, especially for larger loans.
- Loan Approval Factors
Just like a traditional loan, lenders still consider your credit score, debt-to-income (DTI) ratio, and loan-to-value (LTV) ratio. However, the flexibility in income documentation allows more room for qualification, making it a powerful solution for high-income, high-deduction earners.
Self-employed buyers now have access to financing solutions that align with their unique path to homeownership.
Example: Real-World Borrower Scenario
Imagine you’re a wedding photographer who earns $150,000 annually but shows just $40,000 in taxable income due to business write-offs. With a bank statement loan, your actual deposits, rather than your adjusted gross income, are considered, potentially qualifying you for a loan amount that better matches your financial reality.
The Bottom Line
The Bank Statement Mortgage Program gives you options. It’s designed to work with your income style, not against it. Whether your income fluctuates month to month or your tax returns don’t tell the whole story, this program offers a clear path to homeownership or real estate investment.
With flexible mortgage options built for self-employed buyers, creating a space that reflects your lifestyle is closer than you think.
Why Work with Pacific Home Loans?
At Pacific Home Loans, we specialize in helping borrowers navigate non-traditional and conventional lending options with confidence. By partnering with a wide network of lenders, we’re able to match you with the right mortgage program for your unique financial situation – whether you’re a first-time homebuyer, looking to refinance, or investing in real estate. Our experienced team offers personalized support to guide you through every step of the home loan process.
We proudly offer mortgage solutions throughout communities in Hawaii, Arizona, California, Colorado, Montana, Nevada, Oregon, Texas, and Washington State. If you’re searching for a trusted mortgage lender in any of these states, Pacific Home Loans is here to help you secure the financing you need with expert guidance and local insight.
Ready to find out if a Bank Statement Loan is right for you?
Contact one of our loan experts today – we’re here to help turn your financial story into an approved mortgage. Contact us today!
Be sure to watch for our next post in the Bank Statement Series, Eligibility & Documentation Requirements – What Borrowers Need to Qualify
