Bank statement loans typically carry interest rates 1% to 3% higher than conventional mortgages—ranging from approximately 7% to 10% in the current market—but they remain an essential financing tool for self-employed borrowers and business owners who cannot document income through traditional tax returns.
Key Takeaways
- Rate range: 7% to 10%, approximately 1–3 percentage points above conventional mortgage rates, depending on credit score, down payment, and lender
- Best for: Self-employed borrowers who evaluate income through 12–24 months of deposits rather than tax returns that minimize reported earnings
- Key factors: Credit score, down payment size, and debt-to-income ratio determine where your rate falls within the typical range
- Shopping matters: Bank statement loan rates and terms vary significantly between mortgage companies, credit unions, and portfolio lenders
- Strategic value: Despite higher rates, these loans can be financially strategic for borrowers whose tax-optimized income would otherwise disqualify them from homeownership
What Is a Bank Statement Loan?
A bank statement loan—also called a “self-employed mortgage” or “alternative documentation loan”—uses your bank statements instead of W-2s or tax returns to verify your ability to repay. These loans emerged for borrowers whose actual income differs significantly from what appears on their tax returns, particularly self-employed individuals who maximize business deductions.
Conventional, FHA, and VA loans strictly require tax returns and pay stubs for income verification. Bank statement loans take a different approach: they evaluate 12 to 24 months of consistent cash flow from your personal or business bank accounts. Lenders review your monthly deposits, apply expense factors, and calculate an average qualifying income based on your real earning capacity.
Bank statement mortgage rates fall under the non-qualified mortgage (non-QM) category, which means they don’t meet the Consumer Financial Protection Bureau’s strict Qualified Mortgage standards. Lenders get more flexibility in underwriting, but you’ll pay higher interest rates for that flexibility. These loans work well for self-employed professionals, freelancers, independent contractors, gig economy workers, and small business owners who have strong cash flow but show reduced income on tax returns because of legitimate business write-offs.
Not sure which loan type fits your situation? Explore all your options at McGowan Mortgages Loan Options.
What Are Typical Interest Rates for Bank Statement Loans from Leading Lenders?
Bank statement loan interest rates currently sit between 7% and 10% as of late 2025. Most qualified borrowers land somewhere in the 7.5% to 9% range based on their credit profile. These rates run about 1 to 3 percentage points above conventional mortgage rates, which usually hover between 6% and 7.5% for well-qualified borrowers.
Why do bank statement program rates carry this premium? It comes down to risk-based pricing. Lenders see alternative documentation loans as higher risk because they rely on manual underwriting instead of automated systems, use non-standard income verification, and can’t be easily sold to Fannie Mae or Freddie Mac. Lenders either hold these loans in their portfolio or sell them on the secondary market at a discount. They offset these costs through higher interest rates.
According to the Mortgage Bankers Association, non-QM loans—which include bank statement programs—now represent about 4–5% of total mortgage originations. This growth reflects increased demand among self-employed borrowers who get shut out of conventional financing despite having strong financial profiles.
Current Bank Statement Loan Rate Snapshot
| Credit Score Range | Typical Rate |
| Excellent (720+) | 7.0%–8.25% |
| Good (680–719) | 8.25%–9.0% |
| Fair (620–679) | 9.0%–10.0%+ |
Rates as of late 2025; subject to market fluctuation
Your actual rate depends on multiple factors: credit score, down payment amount, debt-to-income ratio, loan amount, property type, and which lender you choose. A self-employed borrower with a 750 credit score, 25% down payment, and strong cash flow might secure rates near the lower end. Someone with a 640 credit score and 10% down would likely see rates approach the higher end.
How to Find the Best Interest Rates for a Bank Statement Loan
Finding competitive self-employed mortgage interest rates requires strategic shopping since pricing varies dramatically between lenders.
Key strategies:
- Shop 3-5 lenders minimum – Compare bank statement loan APR (includes fees), not just rates
- Contact multiple lender types – Portfolio lenders, credit unions, non-QM specialists, mortgage brokers
- Understand rate locks – 30, 45, or 60-day locks protect against market fluctuations
- Negotiate points and fees – Each discount point (1% of loan) reduces rate by ~0.25%
- Consider brokers vs direct lenders – Brokers access multiple programs; direct lenders offer streamlined processing
Estimate your potential monthly payment with our free Mortgage Calculator.
Bank Statement Loans vs. Conventional Mortgages: How Do Interest Rates Compare?
Understanding how bank statement mortgage rates stack up against conventional financing helps you evaluate whether the rate premium is worth the additional purchasing power these programs provide.
| Feature | Bank Statement Loan | Conventional Mortgage |
| Typical Interest Rate | 7%–10% | 6%–7.5% |
| Income Documentation | 12–24 months bank statements | W-2s, pay stubs, tax returns |
| Minimum Credit Score | 620–660 | 620–680 |
| Down Payment | 10%–20%+ | 3%–20% |
| PMI Required | Varies by lender | Yes, if <20% down |
| Best For | Self-employed, business owners | W-2 employees |
| Loan Limits | Often higher (up to $3M+) | Conforming limits apply |
The interest rate difference—usually 1 to 3 percentage points—adds up over the life of your loan. On a $400,000 mortgage, the gap between a 6.5% conventional rate and an 8.5% bank statement loan rate equals about $490 more per month, or roughly $176,000 additional interest paid over 30 years.
But this comparison assumes you can qualify for conventional financing in the first place. The National Association of Realtors reports that approximately 16 million Americans are self-employed. This is a substantial market that conventional lending often fails to serve well. For many self-employed borrowers, the real choice isn’t between a conventional loan at 6.5% and a bank statement loan at 8.5%. The choice is between a bank statement loan at 8.5% and no mortgage approval at all.
Conventional mortgages follow strict qualifying ratios and use your adjusted gross income from tax returns as the approval basis. If you’re a successful business owner who writes off vehicle expenses, home office costs, depreciation, and other legitimate deductions, your taxable income might be $80,000 even though your actual cash flow is $200,000. A conventional lender would qualify you based on the $80,000 figure, which dramatically limits your purchasing power or disqualifies you entirely. Bank statement loans calculate qualifying income based on your deposits, typically using 50% to 100% of your average monthly deposits depending on account type and expense documentation.
Factors That Influence Bank Statement Loan Interest Rates for Borrowers
Multiple variables determine where your rate falls within the typical 7% to 10% range for bank statement loans. Understanding these factors helps you position yourself for the most competitive pricing possible.
Credit Score Requirements and Rate Impact
Your credit score is probably the single most influential factor in determining your bank statement loan interest rate. Lenders use tiered pricing models where each credit score range corresponds to specific rate adjustments. Most bank statement loan programs require a minimum credit score between 620 and 660, though some portfolio lenders may go slightly lower if you have compensating factors like large down payments.
The rate difference between credit tiers can be substantial. A borrower with a 760 credit score might receive a rate 1.5 to 2 percentage points lower than someone with a 640 score, all other factors equal. Even a credit improvement of 20 to 40 points can lead to meaningful rate reductions—potentially saving you tens of thousands of dollars over the life of your loan.
Down Payment and Loan-to-Value (LTV) Ratio
The size of your down payment directly impacts your interest rate because it affects the lender’s risk exposure. Loan-to-value ratio—the loan amount divided by the property’s value—is a key underwriting metric. Lower LTVs mean better pricing. Most bank statement loan programs require minimum down payments between 10% and 20%, though some lenders will go as low as 10% for exceptionally qualified borrowers with excellent credit and strong cash flow.
But putting down the minimum rarely gets you the best rate. Many lenders offer pricing improvements at specific LTV thresholds. You might see a rate reduction when you reach 80% LTV (20% down), another improvement at 75% LTV (25% down), and potentially further reductions at 70% or even 60% LTV. A 25% or larger down payment signals strong financial stability and reduces the lender’s potential loss in foreclosure. This often results in rates that are 0.25% to 0.75% lower than what you’d receive with a 10% or 15% down payment.
Debt-to-Income (DTI) Ratio Considerations
Your debt-to-income ratio—the percentage of your monthly gross income consumed by debt payments—is another critical pricing factor. Lenders calculate DTI for bank statement loans using the qualifying income derived from your bank statement deposits, not your tax return figures. Most bank statement loan programs target maximum DTI ratios below 43% to 50%, though some portfolio lenders offer flexibility up to 55% for borrowers with excellent credit and substantial reserves.
Lower DTI ratios signal stronger repayment capacity and generally result in better pricing. A borrower with a 35% DTI might receive a rate 0.25% to 0.5% lower than someone at 48% DTI, all else equal.
Loan Amount and Property Type
The size and purpose of your loan also influence your rate. Jumbo bank statement loans—those exceeding conforming loan limits (currently $806,500 in most areas)—may carry different pricing than smaller loans, though this varies by lender. Some portfolio lenders prefer larger loans and offer competitive jumbo pricing. Others add premiums for amounts above certain thresholds.
Property type matters significantly. Primary residences typically receive the best rates because borrowers are most motivated to keep their own homes out of foreclosure. Second homes carry slightly higher rates. Investment properties—which experience higher default rates during economic downturns—may see rate premiums of 0.5% to 1% or more compared to owner-occupied properties.
5 Ways to Secure a Lower Bank Statement Loan Rate
- Boost your credit score above 720 before applying – Even small improvements can unlock better pricing tiers
- Make a down payment of 20% or more – Reaching key LTV thresholds triggers rate reductions
- Reduce existing debts to lower your DTI ratio – Pay down credit cards and other obligations before applying
- Shop at least 3–5 lenders and compare APRs – Rates vary significantly between lenders for identical scenarios
- Consider buying down the rate with discount points – If you plan to hold the loan long-term, upfront points can reduce your rate
Ready to see what rate you qualify for? Contact McGowan Mortgages for a personalized quote.
Are Bank Statement Loans Good for Self-Employed People?
Yes—bank statement loans are specifically designed for self-employed individuals and represent one of the best mortgage options for this demographic.
Why traditional underwriting penalizes self-employed borrowers:
- Tax optimization: Write-offs reduce reported income but don’t reflect actual cash flow
- Approval gap: Urban Institute study shows self-employed are 40% less likely to get conventional approval
- Income calculation: Conventional loans use adjusted gross income; bank statement loans use deposits
How bank statement loans solve this:
| Challenge | Solution |
| Tax returns show low income | Qualify using 12-24 months of deposits |
| Business deductions reduce reported earnings | Calculate income from actual cash flow (50-100% of deposits) |
| Limited purchasing power conventionally | Often doubles or triples qualifying loan amount |
Example: $20,000 monthly deposits vs $10,000 reported taxable income = double the qualifying income with bank statement loans.
How Does Bank Statement Loan Underwriting Work?
Bank statement loans require manual underwriting where experienced underwriters review your complete financial picture, unlike conventional loans that use automated systems.
The underwriting process:
| Stage | What Happens |
| Application | Submit 12 or 24 months of bank statements |
| Income Analysis | Underwriters review deposits, identify income patterns, distinguish recurring vs one-time transfers |
| Income Calculation | Personal statements: 100% of deposits<br>Business statements: 50-75% of deposits (expense factor applied) |
| Verification | May request letters of explanation for large deposits or unusual transactions |
| Red Flags Reviewed | Overdrafts, NSF fees, irregular deposit patterns |
| Timeline | 30-45 days from application to closing |
Underwriters verify your income is stable, sustainable, and sufficient to cover expenses plus the proposed mortgage payment, plus reserves (typically 2-12 months of housing payments).
How Many Months of Bank Statements Are Required?
Most bank statement loan programs require either 12 months or 24 months of consecutive bank statements, with the specific requirement varying by lender and your overall financial profile. The 12-month option is more common and provides sufficient transaction history for underwriters to evaluate your income consistency and calculate qualifying amounts. Some lenders offer 24-month programs that may provide slightly better pricing or higher qualifying income calculations by demonstrating longer-term financial stability.
You can typically provide either personal bank statements or business bank statements, or sometimes a combination of both. Personal statements are simpler to underwrite since they reflect your after-expense income, while business statements show higher deposit volumes but require expense factor adjustments. Consistency in your banking patterns matters significantly. Underwriters want to see regular, predictable income deposits rather than sporadic large deposits followed by months of minimal activity.
Do I Need a Tax Return for a Bank Statement Loan?
No—the defining feature of bank statement loans is that they don’t use tax returns to calculate your qualifying income. This is precisely what makes them valuable for self-employed borrowers whose tax-optimized returns don’t reflect their actual cash flow and debt repayment capacity.
However, some lenders may request copies of your tax returns for verification purposes only, not for income qualification. They want to confirm you’re actually self-employed, that you’re filing returns as required by law, and that there are no major discrepancies between your stated situation and your filed taxes. These returns don’t determine your approval or the loan amount—your bank statements handle that calculation entirely.
Alternative documentation that some lenders accept includes CPA letters confirming your self-employment status and income, profit and loss statements for your business, or additional asset documentation demonstrating financial strength. The specific requirements vary by lender and program, but the core principle remains constant: your bank statement deposits, not your tax return income, determine your qualification.
Do Bank Statement Loans Have Higher Interest Rates?
Yes, bank statement loans consistently carry interest rates 1-3% higher than conventional mortgages.
Why the rate premium exists:
| Reason | Impact |
| Non-QM classification | Doesn’t meet Qualified Mortgage standards |
| Manual underwriting | Higher processing costs than automated systems |
| Secondary market limitations | Can’t be sold to Fannie Mae/Freddie Mac |
| Limited lender competition | Fewer lenders offer these programs |
When the higher rate makes financial sense:
A self-employed borrower earning $200,000 annually might show only $80,000 on tax returns after deductions. Conventional approval: ~$350,000. Bank statement approval: $600,000+. The 1-2% rate premium is worthwhile for doubling purchasing power and accessing better properties.
Unsure which loan program maximizes your buying power? Explore your options with McGowan Mortgages.
What Lenders Offer Bank Statement Loans?
Bank statement loans are specialty products offered by select lenders who have expertise in alternative documentation underwriting. These lenders either maintain portfolio lending capabilities or have established relationships with non-QM investors on the secondary market.
Portfolio lenders—typically regional banks, credit unions, and private lending institutions—keep loans on their own balance sheets rather than selling them immediately after closing. This gives them complete flexibility in underwriting guidelines since they don’t need to conform to external investor requirements. Portfolio lenders often provide the most creative solutions for complex scenarios but may offer limited loan amounts or geographic restrictions.
Non-QM specialists are mortgage companies that focus exclusively or primarily on alternative documentation loans: bank statement programs, asset depletion loans, and other non-conventional products. These lenders have developed streamlined processes, experienced underwriting teams, and strong secondary market relationships that often result in competitive pricing and efficient processing.
Credit unions sometimes offer bank statement loan programs to members, particularly self-employed business owners who maintain business accounts at the institution. Credit unions’ cooperative structure and focus on member service rather than profit maximization can translate into slightly better rates or terms, though their program availability varies widely by institution.
Mortgage brokers provide valuable access to multiple bank statement loan sources simultaneously. Rather than approaching lenders individually, you work with a broker who shops your scenario to their network of wholesale lenders—potentially including portfolio lenders, non-QM specialists, and credit unions—to identify the best combination of rate, terms, and underwriting flexibility. Not all mortgage lenders offer bank statement programs, which makes working with specialists essential.
Tips to Secure the Lowest Bank Statement Loan Interest Rates
| Strategy | Action | Impact |
| Improve Credit Score | Boost to 720+ before applying; pay down balances, correct errors | 20-40 point increase = 0.25-0.5% rate reduction |
| Increase Down Payment | Reach 20%, 25%, or 30% thresholds | Each LTV tier = 0.125-0.375% lower rate |
| Reduce DTI Ratio | Pay down existing debts before applying | 35% vs 48% DTI = 0.25-0.5% better rate |
| Shop Multiple Lenders | Get 3-5 quotes, compare APRs | Freddie Mac: saves average $1,500 over loan life |
| Clean Bank Statements | Maintain consistent deposits, avoid unusual transactions | Easier underwriting = better approval odds |
| Consider Rate Buydown | Pay discount points at closing | 1 point (1% of loan) = ~0.25% rate reduction |
What’s the Average Interest Rate on a $10,000 Personal Loan vs. Bank Statement Mortgage?
| Loan Type | Interest Rate | Security | Purpose |
| Personal Loan | 8-15%+ | Unsecured (no collateral) | Debt consolidation, emergencies, purchases |
| Bank Statement Mortgage | 7-10% | Secured by real estate | Home purchase, refinancing |
The key difference: Bank statement mortgages offer lower rates despite non-QM status because real estate collateral reduces lender risk. Personal loans have no collateral, resulting in higher rates even for smaller amounts.
For homebuyers: If considering a personal loan for down payment funds, note that most lenders require seasoning borrowed funds for 60+ days, and some prohibit using borrowed funds entirely.
Can I Buy a House with a Bank Statement Loan?
Yes—bank statement loans are full-featured mortgage products designed specifically for purchasing primary residences, second homes, and investment properties. They function identically to conventional mortgages in terms of the actual home purchase process. The only difference is the income documentation method used during underwriting.
You can use a bank statement loan to purchase any eligible property type. Primary residences receive the best rates and terms since lenders view owner-occupied properties as lowest risk. Second homes carry slightly higher rates, typically 0.25% to 0.5% more than primary residences. Investment properties see the largest rate premiums—often 0.5% to 1% or more above primary residence rates—because investors are more likely to walk away from properties during financial distress compared to homeowners protecting their own residences.
Bank statement loans are also available for refinancing existing mortgages. You can lower your rate, eliminate mortgage insurance, access equity through cash-out refinancing, or consolidate debt. Property eligibility extends to single-family homes, condominiums, townhouses, and two-to-four-unit properties. Some lenders even offer programs for larger multifamily properties. Most bank statement loan programs have higher loan limits than conforming conventional mortgages, with many lenders offering up to $3 million or more for well-qualified borrowers.
Calculate your estimated monthly payment for a bank statement loan using our free Mortgage Calculator.
Are Bank Statement Loans Worth It?
It depends entirely on your specific situation, but for most self-employed borrowers who cannot qualify conventionally, the answer is yes.
| Pros | Cons |
| No tax returns required for income qualification | Interest rates 1–3% higher than conventional loans |
| Reflects true cash flow for self-employed borrowers | Larger down payment typically required (10–20%+) |
| Higher loan amounts possible | Not offered by all lenders |
| Flexible underwriting guidelines | May have prepayment penalties (lender-dependent) |
The financial calculus comes down to opportunity cost. If your tax returns show $90,000 in adjusted gross income but your actual cash flow is $180,000, a conventional lender might approve you for a $375,000 purchase. A bank statement lender could approve you for $700,000. The difference between purchasing a $375,000 home and a $700,000 home—in terms of location, size, quality, and potential appreciation—often far outweighs the 1.5% rate premium you’ll pay.
Bank statement loans can be stepping stones rather than permanent solutions. Many borrowers use them to purchase properties, then refinance into conventional products once they’ve been established in business longer, can show stronger tax return income, or property appreciation provides sufficient equity to unlock better conventional terms.
How Much Would a $5,000 Personal Loan Cost a Month?
To directly address this common search query: A $5,000 personal loan at a typical 10% APR over a 36-month term would result in monthly payments of approximately $161. Over the full three years, you’d pay roughly $5,796 total—the original $5,000 principal plus $796 in interest charges.
However, if you’re a prospective homebuyer researching mortgage financing, it’s important to understand that personal loans and mortgage products serve entirely different purposes and operate under different terms. Personal loans are unsecured debt with higher interest rates but provide quick access to smaller amounts for purposes like debt consolidation, emergency expenses, or major purchases. Mortgages—including bank statement loans—are secured by real estate collateral, carry much lower interest rates, involve substantially larger loan amounts, and extend over much longer terms (typically 15 or 30 years).
If you’re considering a personal loan to help with down payment funds, be aware that most mortgage lenders require you to season these funds for 60 days or more before they can be used toward your purchase, and some lenders prohibit using borrowed funds for down payments entirely. It’s generally more advantageous to save cash directly or seek gift funds from family members.
Conclusion
Bank statement loans fill a critical gap in the mortgage market. They enable self-employed professionals, freelancers, and business owners to achieve homeownership despite non-traditional income documentation. Bank statement loan interest rates run about 1% to 3% higher than conventional mortgages—typically 7% to 10% in today’s market—but this provides access to financing that would otherwise be unavailable to borrowers whose tax returns don’t reflect their true earning capacity.
The factors that influence where your rate falls within this range are largely within your control. Strengthen your credit score, increase your down payment, reduce your debt-to-income ratio, and shop multiple lenders for competitive offers. You can position yourself for the most favorable terms possible. Understanding how lenders calculate qualifying income using bank statement deposits rather than tax return figures helps you prepare documentation and set realistic expectations throughout the application process.
For the millions of self-employed Americans who maximize business deductions to minimize taxable income, bank statement loans represent not just an alternative to conventional financing. They’re often the only realistic path to homeownership and real estate investment. The higher interest rate is the price of admission to the housing market and the wealth-building opportunities property ownership provides.
Ready to explore your bank statement loan options? Contact McGowan Mortgages today to speak with a specialist who understands self-employed financing and can help you secure competitive rates for your unique situation.
Frequently Asked Questions
Q: What is a bank statement loan?
A: A bank statement loan is a mortgage that uses 12–24 months of bank deposits instead of tax returns to verify income, specifically designed for self-employed borrowers whose tax returns understate their actual cash flow.
Q: How do I qualify for a bank statement loan?
A: You typically need a credit score of 620 or higher, a down payment of 10–20%, and 12–24 months of consistent bank statement deposits showing sufficient income to support the proposed mortgage payment.
Q: Are bank statement loans good for self-employed people?
A: Yes, they’re specifically designed for self-employed borrowers whose tax returns show reduced income after business deductions, allowing qualification based on actual cash flow rather than reported taxable income.
Q: How many months of bank statements are required?
A: Most lenders require either 12 or 24 months of personal or business bank statements, with the specific requirement varying by lender and program.
Q: Do I need a tax return for a bank statement loan?
A: No, bank statement loans do not use tax returns to calculate qualifying income. Some lenders may request them for verification purposes only, but they don’t determine your approval amount.
Q: What lenders offer bank statement loans?
A: Portfolio lenders, non-QM specialists, some credit unions, and mortgage brokers with access to multiple wholesale lenders offer these programs. Not all conventional mortgage companies provide bank statement loans.
Q: What credit score is needed for a bank statement loan?
A: Most programs require a minimum credit score of 620–660, though better rates require scores of 700 or higher, with the best pricing typically available to borrowers with 720+ scores.
Q: Are interest rates higher for bank statement loans?
A: Yes, bank statement loan interest rates typically run 1–3 percentage points higher than conventional mortgages, currently ranging from approximately 7% to 10% depending on borrower qualifications.
Q: Can I buy a house with a bank statement loan?
A: Yes, bank statement loans can be used for purchasing primary residences, second homes, and investment properties, as well as for refinancing existing mortgages.
Q: How does bank statement loan underwriting work?
A: Underwriters analyze your bank statement deposits over 12–24 months, calculate average monthly income, apply expense factors if using business accounts, and evaluate your overall ability to repay based on credit, assets, and debt obligations.
Q: Are bank statement loans worth it?
A: For self-employed borrowers who cannot qualify conventionally due to tax-optimized returns, the 1–3% rate premium is typically worthwhile to gain access to homeownership and significantly increased purchasing power.
Q: What’s the average interest rate on bank loans?
A: Bank statement mortgage rates currently range from approximately 7% to 10%, depending on credit score, down payment, debt-to-income ratio, and lender-specific pricing.
Q: Do bank statement loans have higher interest rates than conventional loans?
A: Yes, bank statement loans typically carry rates 1–3 percentage points higher than conventional mortgages due to their non-QM classification and alternative documentation requirements.
Q: What’s the average interest rate on a $10,000 personal loan?
A: Personal loans typically carry interest rates between 8% and 15% depending on credit score, significantly higher than secured mortgage debt like bank statement loans.
Q: How much would a $5,000 personal loan cost a month?
A: At a typical 10% APR over 36 months, a $5,000 personal loan would cost approximately $161 per month, totaling $5,796 including interest over the full term.
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