Bank statement loans in Michigan, with the math shown.
A bank statement loan qualifies a self-employed Michigan borrower on the deposits in 12 or 24 months of bank statements instead of tax returns. The lender gets from deposits to income in four steps: count the deposits, back out what isn’t income, apply an expense factor if the statements are business accounts, and average what’s left over the months. This page walks through each step with an example, so you can see roughly where you land before anyone pulls your credit.
I’m Rob McKenney, a Marine Corps veteran and an independent mortgage broker in Milford. I run the same statements through more than one lender’s guidelines, because the same deposits can produce a noticeably different income depending on whose rules they go through.
Call Rob: (810) 819-8686 Run My StatementsA bank statement loan is a non-QM mortgage, and it usually costs more than a conventional loan. So the first thing I check is whether your tax returns still work once the right deductions are added back. Depreciation, depletion, business use of your home and a few other write-offs reduce your taxable income without costing you cash, and agency underwriting adds them back. For a lot of business owners that closes the gap, and the cheaper loan wins.
If the add-backs don’t get you there, or your income dropped on paper because of how you structured the business, that’s when bank statements make sense. The full rundown of every self-employed option, including the add-back table, is on my self-employed mortgage page. This page is about one thing: how the bank statement number actually gets built.
Personal statements if your business income lands in your personal account, business statements if it stays in the business account. Then 12 months or 24. The lender totals every deposit in that window.
Transfers between your own accounts, refunds, loan proceeds, credit card advances, tax refunds, and any deposit that doesn’t fit the pattern of the business. Large deposits that look unusual get questioned and either documented or removed.
Business deposits aren’t profit, so the lender assumes a share of them went to running the business. That share is either a standard factor the lender uses, a factor tied to your type of business, or a lower ratio your CPA or tax preparer documents, subject to the lender’s minimum. Personal statements can skip this step, because the business expenses were paid before the money reached you, but most lenders only allow that when you also show a few months of statements from a separate business account. If business and personal money run through one account, expect the expense factor to apply.
Divide what’s left by the number of months. If you own part of the business rather than all of it, most programs count only your share of business-account income, and most set a minimum ownership share before business statements can be used at all. The result is the monthly income the lender qualifies you on.
Say you own a residential remodeling company outright and run everything through a business checking account. These numbers are made up to show the mechanics, not to predict your result.
| Step | Standard expense factor | CPA-documented expense ratio |
|---|---|---|
| Total deposits, 24 months | $480,000 | $480,000 |
| Less transfers, refunds, a truck loan deposit | −$30,000 | −$30,000 |
| Eligible deposits | $450,000 | $450,000 |
| Expense factor used | 50% (an example standard factor) | 30% (from a CPA letter) |
| Income after expenses | $225,000 | $315,000 |
| Divided by 24 months | $9,375 a month | $13,125 a month |
Illustration only. Expense factors, eligible deposits and documentation rules are set by each lender and change over time. This is not a quote, an approval or an estimate of what you will qualify for.
Same contractor, same statements, and a difference of $3,750 a month in qualifying income, entirely from how the expenses are counted. That’s why I ask early whether your CPA will document your real expense ratio, and why I don’t take the first lender’s number as the answer.
A landscaping or snow-removal company, a pool installer, a roofer or a lake-country marina can show a huge summer and a quiet winter, or the reverse. The averaging window matters more for those businesses than for anyone else.
If this year is clearly stronger than last, because you added a crew, raised prices or landed a contract, twelve months lets the better year carry the file. Lenders will still look at whether the recent months support the average, and a twelve-month window that starts at the top of your busy season can work against you as easily as for you.
If one year had a dip, an illness, a slow season or a big equipment purchase that ran through the account, twenty-four months smooths it out. It also shows a lender two full cycles of a seasonal business, which tends to read as more stable than one.
If the most recent months are running well below the earlier ones, expect questions. Many lenders will use the lower figure or ask for an explanation and support from your CPA. It’s better to know that before applying than to find out in underwriting.
Lenders limit how many non-sufficient-funds or overdraft events they’ll accept in the last twelve months. A few can be explained; a pattern is a problem.
A deposit that’s out of pattern needs a paper trail, especially on personal statements. If you can’t document it, it usually comes out of the average.
Business and personal money running through the same account makes step two harder, and most lenders will apply a business expense factor to it. It can still work, but sorting out which deposits are business income is part of the job.
Most programs want about two years of self-employment, confirmed by a CPA or tax preparer, a business license or a similar record. Some allow less with prior experience in the same field.
If you own half the business, most programs count half of the business-account income, and most require a minimum ownership share. Have your ownership documented before we start.
If you’re paid on 1099s and they tell the story cleanly, a 1099-only program can be easier than reconciling statements. I compare both once I can see the numbers.
Your last two years of tax returns if you have them, so I can run the add-back math first. Twelve to twenty-four months of the statements you’d use, personal or business. A sense of how long you’ve been in business and what share you own. And whether your CPA or tax preparer will sign a letter confirming the business and, ideally, your expense ratio. From there it’s you and me working out which version gives you the strongest file.
Also using equity instead of buying? Some lenders offer fixed-rate home equity loans on bank statements too. See what to do if a HELOC was denied.
I’ll check whether your tax returns work first, then run your statements through more than one lender’s guidelines and show you where each one lands. We’ll figure it out.
Call Rob: (810) 819-8686 Run My StatementsEvery self-employed option, including 1099, P&L and asset-based loans, is on the self-employed mortgage page.
