Use A CPA Letter To Lower — The Quick Read: a CPA letter replaces a lender’s default expense assumption on business bank deposits with a documented, lower figure, which raises qualifying income on a bank statement loan. It only works on business accounts, only helps when the business’s real cost structure runs below the default, and it needs specific credentialing to survive underwriting. For a rental property purchase itself, most investors end up on a DSCR loan instead, where this whole mechanic doesn’t apply.
Key Takeaways
- The default expense factor on business bank deposits assumes a chunk of every deposit is overhead, not income — a CPA letter can document a lower, real ratio.
- Personal bank statements don’t use this mechanic at all; deposits are averaged directly, no haircut applied.
- Low-overhead service businesses (consulting, freelance, professional services) see the biggest gain from a CPA letter. High-expense businesses see little to none.
- Co-mingled accounts and pass-through deposits (money that flows straight back out to subcontractors) complicate the calculation and sometimes defeat the strategy entirely.
- This tool affects a borrower’s personal qualifying income. It has no bearing on how a rental property’s own DSCR loan gets sized.
The Setup: Why the Expense Factor Exists in the First Place
Business bank statement loans face a documentation problem that W-2 underwriting never has to solve. A deposit into a business account isn’t clean income — it’s gross revenue before payroll, vendor invoices, rent, insurance, and every other operating cost gets paid out. Lenders can’t just average the deposits and call it income, because that would wildly overstate what the business owner actually keeps.
The fix works like this: the lender subtracts a set percentage from gross deposits, then counts the rest as qualifying income. Trade coverage of non-QM underwriting describes this expense-ratio approach as one area where lenders build in real flexibility, rather than applying one rigid rule to everyone. As Scotsman Guide puts it, “another opportunity for flexibility arises in the expense factor.” That flexibility is exactly why a CPA letter matters.
Across the wholesale bank statement programs Lendmire places files with, the fixed-ratio approach typically works in tiers, based on the type of business. A service business with no employees usually gets a lower assumed expense ratio. That ratio goes up once the business has staff or sells a physical product. An accountant-provided ratio, or a profit-and-loss method, offers an alternative path alongside these fixed tiers. None of these numbers are set in stone across the industry — they vary by program, subject to lender guidelines and full underwriting.
Key Terms Defined
Expense factor (or expense ratio): the percentage subtracted from gross business deposits before the remainder counts as qualifying income on a bank statement loan.
CPA letter: a signed statement from a CPA, enrolled agent, or other qualifying tax preparer certifying the business’s actual operating expense ratio, submitted in place of a lender’s default assumption.
Business bank statement: a statement from an account titled to the business, where deposits represent gross revenue rather than net take-home pay — this is the only account type the expense-factor mechanic applies to.
Qualifying income: the monthly income figure an underwriter actually uses to size the loan, calculated by dividing eligible deposits (after the expense ratio is applied) by the number of statement months reviewed.
Pass-through deposits: money that hits a business account and flows straight back out — to subcontractors, crews, or vendors — without ever becoming the owner’s real income, which some underwriters exclude from the calculation entirely rather than simply applying a ratio to it.
The Mechanics, Step by Step
The process is mechanical, not negotiable — the only lever a borrower controls is documentation.
1. The lookback window gets set. Most bank statement programs pull 12 consecutive months of statements; some pull 24. Statements must be consecutive — a transaction history printout doesn’t substitute.
2. The lender classifies the account. Personal statements get averaged directly with no expense deduction at all. Business statements trigger the expense-ratio mechanic. This single classification decision reshapes everything downstream.
3. The default ratio applies unless documentation says otherwise. Absent a CPA letter, the file falls back to the program’s standard fixed tier for that type of business.
4. A CPA letter, if submitted, overrides the default. The letter certifies the business’s actual expense ratio as a percentage of gross revenue. It doesn’t change the deposit total — it changes only the percentage subtracted before qualifying income gets calculated.
5. Underwriting checks the letter for completeness. A missing or incomplete letter simply reverts the file back to the default ratio. No exception gets granted without proper proof.
Several things decide whether the letter actually helps. First, who prepared it and their credentials. Second, whether the stated period matches the bank statements being reviewed. Third, whether the business type even allows for a lower ratio. This depends on things like whether it’s a service or product business, and how many employees it has.
What the Letter Actually Needs to Say
A CPA letter that gets accepted has to identify the preparer by name and license type, name the business, state the specific expense ratio as a percentage, and reference the same time period as the bank statements being underwritten. A vague note on letterhead saying “expenses are low” isn’t a substitute for a stated, defensible percentage tied to that exact review period.
Across bank statement files Lendmire’s wholesale network reviews, the letters that hold up cleanly are the ones prepared by a licensed CPA or enrolled agent who’s actually done the business’s books — not a one-off engagement written solely to support a mortgage application. Underwriters can tell the difference, and a thin letter risks getting kicked back, which just reverts the file to the default ratio and costs the borrower the time it took to get the letter in the first place.
The Math, in Plain Terms
The gain from a CPA letter is proportional to the gap between the default assumption and the business’s actual cost structure. A consulting practice with minimal overhead might document a real expense ratio well below what a fixed-tier default would otherwise assume — and that gap flows straight through to qualifying income, and from there to how much loan the deposits will support.
A restaurant, a contractor with heavy materials and labor costs, or any inventory-driven retail operation runs the opposite direction. If the business’s real expense ratio sits close to or above what the default already assumes, a CPA letter produces little or no benefit. Getting one anyway just costs time and a preparer’s fee for no practical gain.
That asymmetry is the whole strategic question here: does this specific business run leaner than the assumption the lender would otherwise apply? If yes, a CPA letter is worth pursuing. If no, it isn’t.
Where This Breaks Down: Co-Mingling and Pass-Throughs
Co-mingled accounts — personal and business transactions running through the same account — are the most common way this strategy stalls out. Personal deposits and business deposits get treated too differently to average together cleanly, and some lenders decline to work with a co-mingled account at all. Keeping personal and business banking separate well before applying is the practical fix, and it needs to happen months ahead of the application, not the week before.
Pass-through deposits create a trickier problem. Picture a general contractor whose account shows money coming in, then immediately going right back out to subcontractors and material suppliers. The full deposit amount doesn’t reflect real income in this case. Some underwriters respond by raising the effective expense factor. Others exclude the pass-through deposits from the averaging calculation entirely. Either way, they won’t just add a CPA letter on top of the raw number. A CPA letter can’t fix a pass-through problem. It only fixes an expense-ratio assumption that’s too conservative for a business that keeps most of what it takes in.
The Floor: How Low Can a CPA Actually Go?
There’s a practical bottom to how low a certified ratio can run, and it varies by lender rather than being a single universal rule. A CPA can’t credibly certify a very low expense ratio on paper if the business’s real cost structure doesn’t support it — and underwriters who see aggressive ratios well outside the norm for that industry tend to ask more questions, not fewer. The gain from a letter is real, but it isn’t unlimited, and stretching the number past what the business can actually document tends to slow the file down rather than speed it up.
Across Lendmire’s wholesale network, the programs that entertain a CPA-documented ratio treat it as one input among several — credit profile, reserves, deposit consistency across the statement period, and overall file strength all factor into how much weight underwriting puts on the letter itself.
Who This Fits — and Who It Doesn’t
This strategy works well for a self-employed borrower whose real costs are meaningfully lower than the lender’s default assumption. Think of a consultant, a freelance creative, a single-owner professional-services firm, or an independent real estate agent. For someone in this position, the letter can turn a marginal file into one that comfortably qualifies.
For a business already running near or above a program’s default assumption, this approach probably won’t help — and may not be worth pursuing. Restaurants, contractors with heavy crew and materials costs, and inventory-heavy retailers rarely see enough of a gap to make the effort worthwhile. This also doesn’t apply at all if a borrower is using a personal bank statement program. That’s because the expense-factor idea only applies to business accounts. Personal deposits are simply averaged, with no ratio applied either way.
This isn’t a credit-quality signal, either. Non-QM borrowers as a group aren’t riskier than conventional borrowers — the average non-QM borrower carried a 776 FICO score, nearly identical to the 781 average on conventional conforming loans, according to Scotsman Guide. The self-employed simply don’t document income the way a W-2 file does, and roughly 15 million Americans — close to 10% of the workforce — now fall into that self-employment category, per Scotsman Guide. A CPA letter is one of the few tools that lets that borrower’s documented income match their real economics. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Where DSCR Loans Sidestep This Entirely
None of this expense-factor approach applies to a DSCR loan. DSCR loans qualify mainly based on whether the property’s rental income covers the payment, subject to lender guidelines. They don’t look at the borrower’s personal or business bank-statement deposits at all. So for an investor buying or refinancing a rental property, the CPA-letter discussion above doesn’t apply here. It’s a personal-income question that matters for a primary residence or a personal-recourse purchase — not for how the rental property itself gets sized.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they’re reviewed differently than a standard owner-occupied mortgage. Investors who want the full mechanics of that qualification path can review Lendmire’s complete DSCR loans guide.
Where the two paths genuinely intersect is capital planning. An investor who’s also self-employed and using a bank statement program for a primary residence — or pulling cash out through one — may free up documented income capacity that supports reserves or a down payment on a separate DSCR-financed rental. For that blended strategy, the expense factor and CPA letter mechanics on the personal side and the property-income mechanics on the DSCR side are worth understanding as two separate tools, not one.
Tax treatment can depend on how funds are used and how a property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
This article is for general informational purposes and isn’t legal or tax advice. Investors weighing a CPA letter, a bank statement program, or a DSCR loan strategy for their specific situation should consult a qualified attorney or CPA before making a decision.
Frequently Asked Questions
Does a CPA letter work on personal bank statements, not just business?
No. The expense-factor mechanic is strictly a business-account concept. Personal bank statement programs average eligible deposits directly with no ratio applied, so there’s nothing for a CPA letter to override on that side.
Can any accountant write this letter, or does it need to be a CPA?
Most programs accept a licensed CPA, an enrolled agent, or another qualifying tax preparer, as long as the letter names the preparer’s credential and license and can be independently verified. A casual note from an unlicensed bookkeeper typically isn’t enough and risks getting the file bounced back to the default ratio.
What happens if my CPA letter gets rejected by underwriting?
The file simply reverts to the program’s standard default expense assumption for that type of business — it doesn’t disqualify the loan outright. A rejection is usually a documentation problem: mismatched dates, an unverifiable credential, or a ratio that looks unrealistic for the business type, all of which can sometimes be corrected with a revised letter.
Does a lower expense ratio ever hurt a file instead of helping it?
An unrealistically low ratio for a given business type tends to invite more underwriting scrutiny rather than less, which can slow the file down. The strategy works best when the certified ratio is genuinely defensible against how that kind of business actually operates.
If I’m buying a rental property, does any of this matter for my loan?
Generally not directly. Most rental-property purchases run through a DSCR loan, which sizes on the property’s own rental income rather than the borrower’s bank-statement deposits. The CPA letter strategy matters more for a personal residence or a personal-recourse bank statement loan, where it can also free up documented income that supports the rest of an investor’s financing plan, subject to lender guidelines and full underwriting.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Self-employed borrowers can compare both super jumbo programs on Lendmire’s self-employed mortgages page.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
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References
1. Scotsman Guide — Don’t Shut the Door on Quality Borrowers
2. Scotsman Guide — A Decade Later, Non-QM Loans Prove a Stable, Crucial Option
3. Scotsman Guide — Which Groups Are Driving Non-QM Lending
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.
