Bank Statement Loans in Folsom, CA

Your tax return doesn't always tell the complete story of your business.

If you're self-employed, own a business, work as an independent contractor, or earn income outside a traditional W-2 structure, legitimate business deductions can reduce the taxable income shown on your tax returns—even when your business produces strong, consistent cash flow.

A Bank Statement Loan offers another way for eligible borrowers to document income.

Instead of relying primarily on traditional tax-return income, Bank Statement Loans evaluate qualifying deposits reflected on personal or business bank statements.

Andrey Dimitrashuk at Rocket Mortgage helps self-employed borrowers and business owners in Folsom, Sacramento, and throughout California evaluate Bank Statement Loans alongside conventional and other available mortgage options.

What Is a Bank Statement Loan?

A Bank Statement Loan is an alternative-documentation mortgage designed primarily for borrowers whose actual business cash flow may not be accurately represented by traditional tax-return calculations.

Rather than qualifying primarily from taxable income shown on your returns, eligible bank deposits are reviewed over a specified period to calculate qualifying income.

Bank Statement Loans generally fall within the Non-Qualified Mortgage, or Non-QM, category.

Non-QM does not mean that income, credit, assets, or ability to repay are ignored. These mortgages are still underwritten. The difference is that alternative documentation may be used to establish qualifying income.

Rocket Mortgage's current Bank Statement program uses the most recent 12 months of eligible bank statements when determining qualifying income.

Who May Benefit From a Bank Statement Loan?

Bank Statement Loans can be particularly useful for:

• Business owners

• Sole proprietors

• Independent contractors

• Freelancers

• Consultants

• Real estate professionals

• Commission-based professionals

• 1099 earners

• Entrepreneurs

• Owners of LLCs, partnerships or corporations

• Self-employed borrowers with substantial legitimate business deductions

• Borrowers whose tax-return income does not fully reflect ongoing business cash flow

A Bank Statement Loan isn't automatically the best mortgage simply because you're self-employed.

Many business owners qualify successfully for conventional, FHA, VA or jumbo financing using traditional documentation. The right strategy is to compare the available options before deciding which qualification method makes the most sense.

Rocket Mortgage Bank Statement Loans

Rocket Mortgage currently offers Bank Statement financing as part of its Non-QM mortgage options for qualified self-employed borrowers.

Instead of relying primarily on traditional tax-return income, qualifying deposits from eligible personal or business accounts can be analyzed to help establish monthly income.

Rocket's current published guidelines include different qualification rules depending on whether personal or business bank statements are being used.

Personal Bank Statements

Rocket Mortgage currently states that a borrower using an eligible personal account must have at least 25% ownership in the business.

The personal account generally must not be used to fund business operations. In this structure, qualifying income is based on money the borrower is paying themselves from the business.

Business Bank Statements

Rocket currently allows eligible business bank statements to be considered when applicable ownership requirements are met.

Current public guidance states that a borrower generally needs a 50% ownership interest when qualifying from a business account. If multiple borrowers are on the mortgage, aggregate ownership may be considered when each qualifying borrower owns at least 25% of the business.

If a personal account is being used to fund the business, Rocket may treat that account as a business account for purposes of the Bank Statement program.

Program requirements are subject to change and should be verified for your individual transaction.

How Bank Statement Income Is Calculated

Bank Statement Loans don't simply add every deposit appearing on an account.

Underwriting evaluates deposits to determine which funds represent eligible recurring business income.

Transfers between accounts, loans, unusual deposits, nonbusiness funds and other amounts that don't represent recurring income may need to be identified or excluded.

When business bank statements are used, business expenses also matter.

Rocket Mortgage currently states that it may apply an expense factor based on the type of business and number of employees. Its public guidance describes expense factors that may range from 20%–80% of business income. In certain circumstances, supporting documentation from a qualified third-party CPA or tax preparer may also be considered.

Because the calculation can vary significantly from one business to another, reviewing your statements before making an offer on a home can be particularly valuable.

How Long Do I Need to Be Self-Employed?

Rocket Mortgage's current published Bank Statement guidelines generally require the business to have been operating for at least two years.

Business history may be documented using items such as a business license, Secretary of State filing, tax-preparer documentation or other acceptable business verification.

Certain circumstances may allow a different analysis when the borrower has relevant prior experience in the same field, subject to underwriting requirements.

Current Rocket Mortgage Bank Statement Guidelines

Rocket Mortgage currently publishes the following general guidelines for Bank Statement financing on a primary residence:

Bank statements: Most recent 12 months

Business history: Generally 2 years

Property units: 1–4 units

Down payment / equity: May range from approximately 10%–35%, depending on factors including loan purpose, property units, loan amount and credit profile

Purchase and rate-and-term refinance loan amounts: Up to $3.5 million in certain qualifying scenarios

Cash-out refinance loan amount: Up to $2.5 million in certain qualifying scenarios

Credit score: Published minimums currently range from approximately 660–740 depending on loan amount, down payment/equity and transaction structure

Maximum DTI: Currently up to 50% under applicable program requirements

These are general public guidelines—not a guarantee of qualification or terms. Actual requirements depend on the borrower, property, loan amount, occupancy, credit, assets, reserves, transaction type and current Rocket Mortgage underwriting guidelines.

Bank Statement Loan vs. Conventional Mortgage

A Bank Statement Loan and a conventional mortgage may look at the same business very differently.

Conventional Mortgage

Traditional self-employed mortgage qualification generally starts with income reflected on tax returns and applicable business schedules.

Business income, expenses and allowable adjustments are analyzed to determine qualifying income.

For many borrowers, this works perfectly well and may provide more favorable overall financing.

Bank Statement Mortgage

A Bank Statement Loan focuses instead on eligible recurring deposits and cash flow reflected in qualifying accounts.

This can be valuable when legitimate business deductions significantly reduce the taxable income shown on the borrower's returns.

Which One Is Better?

Neither is automatically better.

If your traditional qualifying income supports the mortgage you want and conventional financing provides better terms, a conventional loan may make more sense.

If tax-return calculations don't accurately reflect ongoing cash flow, a Bank Statement Loan may provide another path.

The important step is comparing both before deciding.

Example: When a Bank Statement Loan May Help

Consider a self-employed business owner whose company receives consistent monthly revenue.

After legitimate business expenses and tax deductions, the owner's tax return may show significantly less income than the amount of cash flowing through the business.

Traditional underwriting may therefore qualify the borrower using an income figure that is substantially below the business's gross deposits.

Under an eligible Bank Statement program, qualifying deposits may instead be analyzed according to the program's expense methodology.

The result can produce a different qualifying-income calculation.

This does not mean all gross deposits become income. Business expenses, ownership, eligible deposits and other underwriting requirements still apply.

Bank Statement Loans for Business Owners

Business owners frequently face a tradeoff between tax efficiency and traditional mortgage qualification.

Expenses such as advertising, equipment, employee compensation, office costs, professional services and other legitimate deductions can reduce taxable income.

Bank Statement Loans can provide an alternative way to analyze business cash flow when appropriate.

This can be particularly useful for borrowers who own profitable businesses but find that their tax returns do not support the desired mortgage under conventional income calculations.

Bank Statement Loans for Independent Contractors and 1099 Earners

Independent contractors, consultants, freelancers and other 1099 professionals may also have income that varies throughout the year.

Depending on the borrower's business structure and available program, Bank Statement financing may allow eligible deposits to help establish qualifying income.

Rocket Mortgage also currently includes bank statements and 1099s among the alternative income documentation that may be used under applicable Non-QM programs.

Purchase a Home With a Bank Statement Loan

Qualified borrowers may use Bank Statement financing when purchasing an eligible property.

Before shopping for a home, it can be useful to review:

• Your business structure

• Percentage of business ownership

• Personal and business bank statements

• Average eligible deposits

• Applicable business-expense calculation

• Credit profile

• Existing monthly obligations

• Down-payment funds

• Mortgage reserves

• Desired loan amount

• Property type and occupancy

Reviewing these items early can help establish realistic purchasing power before you make an offer.

Bank Statement Refinance Options

Bank Statement qualification may also be available for eligible refinance transactions.

Depending on the transaction and current program requirements, this may include rate-and-term or cash-out refinancing.

Rocket's current published guidance indicates Bank Statement loan amounts may reach $3.5 million for qualifying purchases and rate-and-term refinances and $2.5 million for qualifying cash-out refinances, depending on credit and other program requirements.

What Documents Should You Prepare?

The exact documentation depends on the borrower and transaction, but preparing your financial records early can make the process easier.

You may be asked for items such as:

• Personal bank statements

• Business bank statements

• Business license or registration

• Operating agreement

• Documentation verifying percentage of business ownership

• CPA or tax-preparer documentation when applicable

• Identification

• Asset statements

• Documentation for down payment and closing funds

• Information concerning large or unusual deposits

• Property documentation

Don't alter or redact transaction information on statements unless specifically instructed by your lender.

Rocket notes that lenders review account history for recurring deposits, sufficient assets, unusual transactions and other information needed to understand the borrower's financial picture.

How to Prepare Your Bank Accounts Before Applying

Good organization can reduce underwriting questions.

Keep personal and business finances separate when practical.

Avoid unexplained large cash deposits.

Maintain documentation supporting significant transfers or unusual deposits.

Avoid unnecessary overdrafts or nonsufficient-funds activity.

Keep complete copies of every statement page.

Don't move large amounts between accounts without maintaining a clear paper trail.

Most importantly, don't restructure your finances simply to obtain a mortgage without first understanding how the change could affect qualification, taxes or your business.

Advantages of Bank Statement Loans

For an eligible self-employed borrower, potential advantages can include:

• Alternative documentation of qualifying income

• Ability to demonstrate recurring business cash flow

• Personal or business bank-statement qualification depending on eligibility

• Financing for borrowers whose tax returns may understate ongoing cash flow

• Potentially higher loan amounts than the borrower could support using traditional income calculations

• An additional mortgage option for borrowers who don't fit conventional documentation requirements

Important Considerations

Bank Statement Loans generally require more than simply proving deposits.

Non-QM financing may involve:

• Different interest-rate pricing than conventional financing

• Larger down-payment requirements

• Greater reserve requirements

• Stronger credit requirements in certain scenarios

• Additional underwriting review

• Detailed analysis of deposits and business expenses

Rocket Mortgage currently notes that Non-QM loans can carry higher rates, require more money down and require several months of mortgage reserves after closing.

That is why a Bank Statement Loan should be compared against available traditional mortgage options rather than automatically selected simply because the borrower is self-employed.