If you're self-employed, a bank statement loan lets you qualify on the deposits you actually make instead of the income left on your tax returns. The first real decision is how many months of statements to use: 12 or 24.
That choice can change your qualifying income by thousands of dollars a month. Most lender pages say "12 for growing businesses, 24 for seasonal ones" and stop there. This post runs the math so you can see which window fits your numbers before you apply.
The short version: Use 12 months when your most recent year is your strongest, because older, slower months drop out of the average. Use 24 months when your deposits are seasonal or lumpy, or the last year had a down stretch, because the longer window smooths it out. Either way you still need 2 years of self-employment, so run both averages before you pick.
New to these loans? Our bank statement loan guide for self-employed buyers covers the whole program, and our bank statement loans in Connecticut page has the current terms. This post goes deep on one question: which window.
Your qualifying income is an average. We add up the deposits that count over the window, divide by the number of months, and adjust for the type of account. The window you choose decides which months go into that average.
There are two account types, and you use one or the other, never both on the same loan:
The 50% factor can go lower. A letter from your tax professional (a CPA, enrolled agent, tax attorney or PTIN-registered preparer) stating your actual expense ratio can replace it. For a low-overhead business, that letter often matters more than the window.
A 12-month window counts only your most recent year. If that year is your strongest, the shorter window works for you.
One thing 12 months does not do: shorten the time-in-business requirement. You still need 2 years of self-employment, and the business itself must have been open 2 years. We verify that through a CPA, a licensing bureau, a Secretary of the State business listing, or an online phone or address listing.
A 24-month window spreads your deposits over two full years. If your income moves around, that is usually the safer read.
Two years also gives the Approval Team a fuller picture of your business. That cuts both ways.
A 24-month window is not a way to hide a business that is shrinking. If deposits are falling, tell us why up front.
These are illustrative examples with made-up numbers, not a quote or an approval. Your result depends on your actual statements and Approval Team review.
Maria owns 100% of a marketing consultancy and uses business statements with the standard 50% expense factor.
Here is how each window comes out:
The 12-month window gives Maria $2,500 more qualifying income every month. Our program's standard debt-to-income limit is 50%, so that difference is up to $1,250 a month of extra room for a mortgage payment and other debts.
Now say Maria's CPA writes a letter showing her real expenses run about 30%. On 12 months, her income becomes $25,000 × 70% = $17,500 a month. For her, the letter moves the number more than the window does.
Joe and his partner each own 50% of a landscaping and snow removal company. Joe uses business statements with the standard 50% expense factor.
Here is how each window comes out for Joe:
The longer window gives Joe $1,500 more a month, because the stronger prior year balances out the slow one. Notice that his 50% ownership cuts the number in half before the expense factor even applies. Many owners miss that until the file is already running.
Go back to Maria. If she pays herself a steady $11,000 a month into her personal account, personal statements would qualify her at about $11,000 with no expense factor. That is less than her $12,500 on business statements, so business statements win for her.
A business with heavy real overhead often flips that math, because the owner's personal transfers can beat a 50% haircut on gross deposits. We run it both ways and use whichever version shows your income more accurately.
Only business income counts. These deposits come out before anything is averaged:
Account behavior matters too. Heavy NSF or overdraft activity can disqualify a file, no matter which window you pick. Before you choose 12 or 24, scan both years for bounced items and plan to explain any one-off spike.
If you're an independent contractor or a commissioned earner paid on 1099s, you may not need bank statements at all. Our 1099 option qualifies you on 12 or 24 months of 1099s, validated by IRS transcript, plus your year-to-date earnings shown on bank statements.
The same window logic applies. A strong recent year points to 12 months of 1099s; a year with a big dip points to 24. It can be the cleaner file when your deposits mix 1099 pay with other money.
A third route, a P&L-only option, uses a 12-month profit and loss statement prepared by the CPA, enrolled agent or CTEC preparer who filed your latest returns. Self-prepared P&Ls don't qualify, and you need at least 50% ownership.
Then send it to us. We'll check your math against your actual statements and tell you which version holds up.
To see what different payments look like, try our mortgage calculator. Program terms are on our bank statement loans in Connecticut page.
Buying a rental instead of a home to live in? A DSCR loan qualifies the property's rent instead of your income, so the window question may not matter.
Our quote takes about 2 minutes. No Social Security number and no hard credit pull. Start here, or call or text (203) 452-9899 and we'll run your 12- and 24-month numbers side by side.
We're a family-owned Connecticut lender, based in Monroe, CT, lending since 1998, with a 4.9-star rating across 450+ Google reviews. We lend in Connecticut, Massachusetts, and Rhode Island.
Neither is better across the board. A 12-month window usually gives higher income when your most recent year is your strongest. A 24-month window usually helps when deposits are seasonal, lumpy, or dipped in the last year. Run both averages and use the one your statements support.
Not on our program. Using 12 months of statements doesn't shorten the time-in-business rule. You need 2 years of self-employment, and the business must have been open for 2 years.
Average monthly qualifying deposits, times your ownership percentage, times one minus the expense factor. The standard expense factor is 50%. A letter from your CPA, enrolled agent, tax attorney or PTIN-registered preparer can lower it, and you need at least 25% ownership.
No, one loan uses one or the other. Personal statements have no expense factor but need 2 months of business statements showing the transfers. If you have both, we can run each version and use the one that shows your income more accurately.
Yes. Our 1099 option uses 12 or 24 months of 1099s, validated by IRS transcript, plus year-to-date earnings shown on bank statements. It can be a cleaner file for contractors paid mostly on 1099s.
Written by Gaetano Ciambriello, CEO of AFC Mortgage Group (NMLS #1783508).
AFC Mortgage Group LLC | NMLS #2801 | Monroe, CT | Equal Housing Lender.
This article is for educational purposes only and is not a commitment to lend. It does not quote or guarantee any rate, term, or approval, and it does not constitute financial, tax, or legal advice. Program guidelines, terms, and availability vary and are subject to change. All loans are subject to credit approval, property approval, and Approval Team review.
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