CPA Letter Affect The Expense Factor — The Quick Read: Yes. A signed CPA letter is the standard document underwriters accept to replace a default expense factor with the business’s actual, documented overhead ratio. That can raise qualifying income, but it can also lower it if the business genuinely spends more than the default assumes. The letter changes the number to match reality — it doesn’t automatically make the file look better.
For a self-employed borrower using bank statements instead of traditional personal-income documentation, the expense factor is the single biggest lever in the whole file. Get it right and the loan amount moves. Get it wrong — or skip the letter when it would have helped — and a qualifying business owner can come up short on income with no obvious explanation. Here’s how the mechanic actually works, where it helps, and where it can quietly hurt.
Key Terms Defined
Expense factor (or expense ratio): the percentage of business bank deposits assumed to cover operating costs — payroll, rent, supplies — before the remainder counts as qualifying income.
CPA letter: a signed statement from a CPA, enrolled agent, or qualifying tax preparer certifying the business’s actual expense ratio for the period covered by the bank statements, used to override a lender’s default assumption.
Eligible deposits: the portion of bank statement activity a lender actually counts toward income, after excluding transfers, loan proceeds, and unexplained or irregular deposits.
DSCR loan: a business-purpose rental-property loan that qualifies primarily on the property’s rental income covering the payment, subject to lender guidelines — expense factors from a borrower’s personal business don’t enter the calculation at all.
What the Expense Factor Actually Does
A bank statement loan skips traditional personal-income documentation and looks at deposit history instead. But raw deposits into a business account aren’t income — some share of every dollar in covers payroll, rent, inventory, or other overhead before the owner ever sees a profit. The expense factor is the haircut that accounts for that.
This isn’t a federal rule. No regulator sets the percentage. It’s a non-QM underwriting convention, and each wholesale program defines it on its own. Actual securitization paperwork for a non-QM bond deal confirms this. The underwriting default sits at 50% of business deposits. But a different ratio is acceptable “as long as the underwriter can see from the bank statements and/or line of business that an alternate expense ratio is accurate,” according to an SEC EDGAR filing for a non-QM securitization trust. That one sentence captures the whole mechanic: there’s a default, and there’s a documented override.
Across the wholesale programs Lendmire places files with, that default typically isn’t one flat number. Most guidelines tie the fixed ratio to how the business is staffed: a service business with no employees often defaults around 20%, a business with a small handful of employees tends to run higher, and any business with a larger staff, or one that sells a physical product, typically defaults to 50%. Those are guideline ranges through select wholesale programs, subject to underwriting — not universal numbers every lender in the market uses.
Personal accounts work differently. Money already in a personal account has generally already covered the borrower’s business costs, so it’s typically counted closer to face value rather than run through the same haircut. That’s also why transfers from the borrower’s own business into their personal account usually count at 100% — the expense factor was already applied on the business side.
So Does a CPA Letter Actually Move the Number?
Yes, and it moves it in whichever direction the business’s real numbers point — not always down. A CPA letter replaces the fixed default with a documented figure specific to that borrower’s business for the exact period the bank statements cover.
Picture a solo consultant with almost no overhead — no staff, no inventory, minimal rent. Under a flat 40% or 50% default, a big chunk of every deposit gets written off as assumed expense that this particular business never actually spends. A CPA letter certifying a lower, real expense ratio lets more of that income count. Run the numbers the other way for a business that’s genuinely capital-heavy — inventory, equipment leases, a real payroll — and a CPA letter might document a ratio above the standard default. In that case, a documented letter working against the borrower is possible, and some programs will simply apply the higher figure or route the file to a different documentation path entirely.
The point of the letter isn’t optimism. It’s accuracy. Underwriting wants the number that reflects how the business actually spends money, and a CPA’s signature is what makes that number credible enough to use instead of the guideline default.
How the Override Actually Gets Underwritten
The process runs in a fairly consistent sequence across the wholesale programs Lendmire works with:
1. Documentation path gets picked first — personal statements, business statements, or a blend. This choice shapes every step after it.
2. The lookback window gets pulled. Twelve or twenty-four consecutive months of statements is standard on most bank statement files, with the bank portfolio program in Lendmire’s network typically running the twelve-month version.
3. The account type sets the default treatment. Business deposits get haircut by the applicable fixed ratio unless a CPA letter says otherwise.
4. A CPA letter, if provided, replaces the fixed default with the documented figure for that statement period.
5. No letter means the file falls back to the default. A borrower who insists their real overhead is lower, but can’t produce a signed letter, doesn’t get the benefit of the doubt — the fixed ratio still applies.
6. Deposit tracing happens regardless. Large, unexplained, or irregular deposits can get flagged or excluded from the average whether or not a CPA letter is on file. A favorable expense ratio doesn’t rescue a deposit pattern that doesn’t hold up.
A profit-and-loss statement is a related but separate tool. Instead of certifying a ratio applied against deposits, a P&L-based qualification calculates income directly from a CPA-prepared statement. On most programs, this income is typically capped around 80% of gross revenue. Lenders verify it against a shorter statement lookback. It solves a similar problem, but through a different document with a different underwriting purpose.
| Documentation path | What it certifies | Typical use case |
|---|---|---|
| Fixed expense ratio (default) | Nothing — a flat assumption applies | Borrower has no CPA letter or P&L ready |
| CPA expense-ratio letter | The business’s actual overhead percentage | Business overhead is well below (or above) the default |
| Profit-and-loss method | Net income directly, capped near 80% of gross | Business has clean books and a shorter lookback |
| Asset-based / asset allowance | Qualifying income from liquid assets, not deposits | High liquidity, inconsistent or seasonal deposit history |
When a CPA Letter Backfires
A CPA letter is not automatically a favor to the borrower — it locks in whatever number the accountant certifies. A business with real overhead above the standard default gets a worse qualifying figure once that letter is in the file, not a better one. There’s no unwinding it after the fact; once a documented ratio is submitted, most programs treat it as the accurate figure going forward.
There’s also a floor. Most programs won’t accept a certified ratio near zero, no matter how lean the business genuinely is — underwriting assumes every operating business carries some baseline cost of doing business. And a letter that hedges with vague language, lacks the CPA’s credentials, or doesn’t tie clearly to the statement period in question can get rejected outright, sending the file back to the fixed default anyway.
The practical takeaway: know your actual numbers before asking for the letter. If a business genuinely runs lean, the letter helps. If the books show real overhead, the fixed default might already be the more favorable path.
Bank Statement Loan or DSCR Loan?
Real estate investors may not need to worry about this at all. Lenders review a DSCR loan mainly on whether the property’s own rental income covers the payment, subject to lender guidelines. A borrower’s personal or business expense ratio never enters the calculation. The rent figure behind that number typically comes from the appraisal itself. For single-family rentals, it’s documented on Fannie Mae’s Single-Family Comparable Rent Schedule, Form 1007. For small multifamily properties, lenders use a comparable operating income form instead.
This distinction matters for self-employed investors. Their traditional personal-income documents, and even their bank statements, can look messy because of legitimate write-offs or a capital-intensive business. One path is fighting for a favorable CPA-certified expense ratio on a personal bank statement file. Another path is buying the rental property with a DSCR loan instead. With a DSCR loan, the property’s own income drives lender review, so the expense-factor question doesn’t come up at all. Lendmire’s complete DSCR loans guide explains how that qualification actually works.
The two products solve different problems. Bank statement loans exist for borrowers financing a primary residence, second home, or business-purpose property where personal or business cash flow is the qualifying basis and traditional income documentation understate real income. DSCR loans exist for rental purchases where the property carries its own weight. An investor doing both — refinancing a primary residence with bank statements while also buying rentals — is going to run into the expense factor conversation on one file and never think about it on the other.
Lendmire’s wholesale network reviews many files, and the expense-ratio conversation comes up most with product-based businesses and multi-employee operations. These categories default to the highest fixed ratio. That means they have the most to gain, or lose, from a documented alternative. Service businesses with lean staffing usually see the smallest change either way, since their default ratio is already close to reality.
What This Means for Loan Sizing
The expense factor feeds directly into qualifying income, which feeds into leverage and loan amount. On the bank statement programs in Lendmire’s network, that range runs from roughly $300,000 up to $6,000,000 on the portfolio non-QM side, with a separate bank portfolio program carrying twelve-month-statement files as high as $30,000,000 on its own leverage ladder — 65% to $5,000,000, 60% to $10,000,000, and 55% up to $30,000,000, through select wholesale programs and subject to underwriting. Leverage on a primary residence steps down as the loan size climbs, and files above $4,000,000 get reviewed case by case before submission rather than following a flat percentage. Credit typically needs to clear 660 on the portfolio program, with reserves running from about three months on smaller loans up to nine months or more as the loan amount rises. Lendmire’s consumer bank-statement lending currently reaches borrowers across a 16-state footprint.
None of that changes the core mechanic, though. A higher qualifying income from a well-documented CPA letter can support a larger loan amount within those ladders — but it still has to reflect what the business actually spends, not what the borrower hopes it spends.
Non-QM lending is the category that bank statement loans sit inside. Overall, it made up around 5% of total mortgage originations in a recent year. Scotsman Guide reports that S&P Global projects non-QM will reach near 30% of non-agency mortgage-backed securities. It’s a growing slice of the market, and the expense factor is one of its most important underwriting details.
Frequently Asked Questions
Can any accountant sign a CPA letter for a bank statement loan?
Generally no. Most programs want a licensed CPA, enrolled agent, or qualifying tax preparer — not the borrower’s own bookkeeper and never a self-prepared statement. The letter needs to carry real credentials because it’s substituting for a guideline default.
What happens if I don’t have a CPA letter?
The file simply reverts to the standard fixed ratio for that business type — typically 20%, 40%, or 50% depending on staffing and product mix, through select wholesale programs. No letter means no override, favorable or otherwise.
Can a CPA letter make my expense factor worse than the default?
Yes. If the certified ratio comes back higher than the standard default because the business genuinely carries more overhead, that’s the number underwriting uses. A CPA letter documents reality — it isn’t a one-way improvement.
Does a CPA letter affect DSCR loans the same way?
No. DSCR loans qualify primarily on the property’s rental income covering the payment, subject to lender guidelines, so a borrower’s personal or business expense ratio isn’t part of that calculation at all. The expense-factor conversation is specific to bank statement lending.
How many months of statements does a lender typically need?
Twelve or twenty-four consecutive months is standard across most bank statement programs, with the specific window depending on which wholesale program the file runs through. Statements need to be consecutive — a printed transaction history usually isn’t accepted as a substitute.
Are you deciding between a bank statement loan and a rental-property purchase? With a rental purchase, the property’s own cash flow could qualify the loan instead. Lendmire can help you compare two paths. One path looks at expense-factor math on a personal file. The other path qualifies a rental purchase using rental income through a DSCR loan. Two guides explain the details: Lendmire’s guide on whether the expense factor replaces a CPA letter and Lendmire’s walkthrough on using a CPA letter to lower the expense factor.
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
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 40 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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. SEC EDGAR — COLT Depositor III ABS-15G Filing
2. Fannie Mae — Single Family Comparable Rent Schedule (Form 1007)
3. Scotsman Guide — One Out of 20 Mortgages Are Non-QM
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.
