Estimate your qualifying income
How lenders turn deposits into income
A bank statement mortgage replaces tax returns with your actual bank activity. The lender adds up eligible deposits over 12 or 24 months and takes out anything that isn’t income, such as transfers between your own accounts, loan proceeds and one-off non-business deposits.
For a business account, the lender then applies an expense factor, because not every dollar deposited is profit. The factor is commonly up to 50% and depends on the type of business and how many employees you have. A letter from your CPA or a third-party-prepared P&L can sometimes support a lower expense factor if your real costs are lower.
For a personal account, deposits are often counted in full, because business expenses were already paid before the money reached you. The result is divided by the number of months to get an average monthly income.
Bank statement income calculation worksheet
Here is the same math the calculator runs, step by step, so you can check it against your own statements.
| Step | Business account | Personal account |
|---|---|---|
| 1. Add up deposits | Total deposits for 12 or 24 months | Total deposits for 12 or 24 months |
| 2. Remove non-income | Subtract transfers between your accounts, loan proceeds, refunds and one-off non-business deposits | Same |
| 3. Apply expense factor | Multiply by (1 − expense factor), commonly up to 50% depending on business type and employees | Usually not applied |
| 4. Apply ownership | Multiply by your ownership share of the business | Not applied |
| 5. Monthly income | Divide by 12 or 24 | Divide by 12 or 24 |
Example: $420,000 in business deposits over 12 months, minus $30,000 in transfers, times a 50% expense factor, divided by 12, comes to about $16,250 a month in qualifying income. This is illustration only, not a qualification.
Why this number can be much higher than your tax return
Conventional underwriting starts from your taxable net income after write-offs, usually averaged over two years. If you take legitimate deductions for vehicles, equipment, depreciation, home office and so on, that number can be a fraction of what your business actually brings in. Bank statement programs start from cash flow instead. That’s why business owners whose returns look thin can sometimes qualify for more this way. Here’s how write-offs affect qualifying income.
Use the “tax return net income” field to see the gap between the two methods side by side.
What this calculator does not do
- It doesn’t decide whether you qualify. Lenders also look at credit, assets and reserves, the property, your debts and how long you’ve been self-employed.
- It doesn’t apply any specific lender’s rules. Expense factors, eligible deposits and ownership rules vary by program.
- It doesn’t show rates or payments, and it isn’t an offer of credit.
Common questions
How many months of bank statements do lenders use?
Most bank statement programs use either 12 or 24 months. Some borrowers do better with 24 months because a strong older year lifts the average. Others do better with 12 because the business has grown. An advisor can run both views.
Do lenders use business or personal bank statements?
Either, depending on the program and how your money flows. Business statements usually get an expense factor applied. Personal statements are often counted in full but must show the business income landing there regularly.
What deposits don’t count?
Transfers between your own accounts, loan or credit-line proceeds, refunds and other one-time non-business deposits are typically excluded. Unusually large deposits may need a short explanation or documentation.
Can my CPA lower the expense factor?
Sometimes. Many programs let a CPA or tax-preparer letter, or a third-party-prepared P&L, show that your actual expense ratio is lower than the default. That can increase qualifying income. Rules vary by lender.
How is income calculated on a bank statement loan?
The lender totals eligible deposits over 12 or 24 months, removes transfers and other non-income deposits, applies an expense factor to business-account deposits and divides by the number of months. The result is your average monthly qualifying income.
How do I find out how much a lender will loan me?
Lenders compare your qualifying income with your monthly debts, including the new housing payment, and also weigh credit, assets, reserves and the property. The calculator only estimates the income piece. An advisor can put the rest together for your scenario.
Should I use 12 or 24 months of statements?
Run both. If your business has grown, 12 months often shows more income. If last year was slower or your income is seasonal, 24 months can smooth it out. Some programs only allow one or the other.
Is the result what I’ll qualify for?
No. It’s a rough estimate of qualifying income under a common method, for planning only. Your actual qualifying income, and whether you qualify at all, depends on the full review of your scenario and the program used.