Need an self-employed loan without tax returns? Here's a top pick.
Utilize Your Bank Account Statements For Loan Approval
As an alternative to conventional mortgages, non-QM bank statement loans offer a unique path to homeownership specifically for self-employed borrowers who may not qualify through standard underwriting guidelines. With these specialty loans, lenders consider 12 or 24 months of personal or business bank statements to verify income instead of requiring W-2s and tax returns.
For example, someone running their own company for multiple years often shows high expenses and business write-offs on their tax returns, despite having consistent cash flow and healthy earnings. By manually reviewing your monthly bank deposits instead, a loan officer can determine your true income ability beyond what IRS tax documents might indicate on paper.
While approval is possible with just three months’ worth of statements under a few programs with 30-percent down, most lenders require a full year or two years of deposits to accurately calculate and confirm your average monthly income.
| 30-year Fixed Loan Type | Conventional | Bank Statements | ||||
|---|---|---|---|---|---|---|
| The loan scenario above is for a borrower with a 740 or higher middle credit score financing a primary home using their personal bank statements. Debt ratios over 50 do not qualify. Bank account statements - borrower shows higher monthly income using their recent 12 months of account statements than with their tax returns' AGI. |
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| Purchase Price: | $1,000,000 | $1,000,000 | ||||
| Down Payment: | $200,000 | $200,000 | ||||
| Loan amount: | $800,000 | $800,000 | ||||
| Monthly Income: | $11,000 | $14,600 | ||||
| Debt ratios: | 52.8% | 40.3% | ||||
These loans help those who earn the majority of their income outside of a traditional 9-to-5 job.
Sheryl is a self-employed small business owner earning around $120,000 per year running her own marketing consultant firm. Because Sheryl's business operates with relatively high costs for advertising, software subscriptions and travel, her taxable income reported after write-offs is reduced on paper every year - despite having very consistent and healthy cash flow.
This gap between Sheryl's actual earnings and reduced tax return income made her ineligible for a traditional conventional mortgage. However, with two solid years of running her own business plus a personal credit score of 720, Sheryl was able to successfully qualify.
Jayson became a licensed real estate agent two years ago. He didn't start earning money in real estate for 9 months while still bartending a few nights per week to make extra cash.
Jayson regularly deposits his earned commissions from home sales plus tips from the bar every single week without fail - averaging right around $7,000 per month cumulatively over the past 12 months between the two income streams.
Despite showing more than adequate monthly income along with a credit score of 742, Jayson's less-than-two-year history of self-employment income unfortunately fell short of the requirements for most conventional lenders. However, he was able to successfully close.
Purchase: $400,000
Loan: 12-month bank statement loan
Down payment - 15-percent.
- No Tax Returns. Unlike conventional loans this popular loan program enables self-employed borrowers the option of qualifying using their job-based deposits on their bank account. There are no tax returns and no 4506-T forms to sign.
- Down payment. While conforming loans offer qualified borrowers a 5-percent down payment, the bank-statement loan requires a minimum of 10-percent to stay below the qualifying debt ratio of 50.
- Interest rate. The interest rate is higher by approx. .75 to 1.5% than traditional income loans based on the borrower's middle credit score and loan-to-value.
- Loan Denial. Your bank statement loan application may be denied because the account has a non-borrower on the statement, expenses are not consistent with the industry, too many NSFs or overdrafts, or monthly deposit amounts vary a lot.
For borrowers who have concerns about qualifying for a bank statement mortgage or simply wish to consider alternative non-QM loan programs, there are several other creative mortgage programs available that utilize use similar calculations but with a different income verification process.
- One potential option is the 1099 income loan. This program is tailored to serve self-employed individuals who classify as 1099 independent contractors or freelancers. Qualification is based solely on the annual income figures reported on your 1099 tax forms - eliminating any need to provide personal tax returns or other documentation that summarizes your net earnings. This simplified approach helps many 1099 earners obtain home ownership.
- Another alternative income document choice is using Profit and Loss (P&L) statements prepared by a certified professional accountant or licensed tax preparer. By evaluating your self-employed income profile through P&L statements covering the most recent year-to-date period and full previous 12 month calendar period, underwriters can understand your true usable income beyond what tax returns may display after legitimate write-offs and deductions. This process presents a much more accurate picture of cash flow and earnings ability for unconventional borrowers.
A third option involves an asset-based lending product that allows you to qualify by leveraging existing liquid assets instead of only income from your job. The requirement is your assets need to be sufficient to qualify. Learn more about how asset based utilization works here.
See answers to questions borrowers also ask about this no tax return loan
The minimum FICO credit score required for approval is 620 for most lenders offering bank statement loans. If you have a middle score of 760 or higher you likely qualify for the most favorable loan terms and rates.
For verification purposes all lenders will require all pages of the most recent 12-24 months of personal or business bank statements when applying for this type of alternative income product. Statements should be consecutive without any gaps between statement periods.
The number of months is typically 3- to 6-months depending on the lending cycle.
Bank statement loans are mainly used to finance primary residences and second homes. Some lenders may provide exceptions for investment property purchases on a case-by-case basis but you generally need a higher down payment and credit scores above 700 in that scenario. The best aternative income loan for self-employed investors is the Asset utilization or DSCR loan.
Because bank statement loans involve manual underwriting looking at your whole financial picture, it generally takes between 2-4 business days on average to get conditionally approved after submitting your completed application with all required documents.
You will need copies of 12 or 24 months of your most recent bank statements, valid identification, housing history for the last 12 or 24 months, copy of your business license covering two years or a signed tax preparer letter confirming your self-employment history, signed purchase contract if buying, and signed authorization to pull your credit report and validate the credit history provided.
1. View the disclosure disclaimer regarding loan approval, loan product availability and qualifying for a loan. Not All borrowers will qualify.