Get A Bank Statement Loan With One — The Quick Read: Yes, in most cases. One declining year does not automatically disqualify a bank statement loan applicant. Underwriters treat a single down year as a trend question, not a hard stop. The lender picks a 12- or 24-month statement window, calculates income off deposits, and looks for signs the decline has leveled off. A well-documented explanation usually carries the file.
A single weak year rattles a lot of self-employed borrowers who assume any dip on paper kills the deal. It usually doesn’t. Bank statement loans exist specifically because traditional personal-income documentation and true cash flow often tell different stories, and a one-year wobble in deposits is common among founders, physicians, contractors, and property investors who had a slow stretch, a big renovation year, or aggressive tax planning that suppressed reported income. The question isn’t whether the decline shows up — it’s how the lender’s matrix reads it.
The One Declining Year Problem: Why It’s a Trend Question, Not a Rejection
A declining year usually gets flagged, reviewed, and resolved — it’s not an automatic denial. Underwriters compare your monthly deposit totals across the statement period, look for seasonal patterns, and decide whether the drop is a blip or a real slide. Their response ranges from asking for an explanation to using a more conservative income average. An automatic decline is rare.
That range matters. A borrower whose income dipped 12% after a slow quarter faces a different conversation than one whose deposits have fallen every single month for a year straight. Across select lenders in Lendmire’s wholesale network, both scenarios get reviewed on the file — property, credit, reserves, and the story behind the numbers all factor in, subject to underwriting.
12-Month vs. 24-Month Windows: Which One Actually Helps a Down Year
The window choice depends entirely on which direction the trend runs, not which one requires less paperwork. If the most recent 12 months look weak next to the prior 12, pulling in the second year to build a 24-month average usually produces a stronger, more stable coverage figure. If income has been flat or rising, a shorter 12-month window sometimes tells the cleaner story.
Loan officers who see this pattern often run both calculations before deciding what to submit. Bank statement programs typically accept either 12 or 24 consecutive months of personal or business statements. A recent decline almost always points toward the 24-month path. Averaging in the stronger prior year smooths out the current dip and shows the business has real earning history behind it — even when the shorter window would technically still qualify.
How the Income Gets Calculated
Bank statement underwriting doesn’t take your gross deposits at face value. For business-account statements, lenders apply an expense ratio — an assumed cost of running the business — before turning deposits into qualifying income. These fixed ratios generally scale with employee count and business type. Service businesses with few or no employees get lower ratios. Larger staffs or product-based businesses get higher ratios. Sometimes an accountant letter or the profit-and-loss method (capped at 80%) can replace the fixed ratio instead. Personal account deposits usually skip this expense-ratio cut entirely. And transfers from your own business into your personal account count in full, dollar for dollar, because that money is already post-expense income.
Irregular deposits get pulled out before any of this math happens. One-time transfers between the borrower’s own accounts, insurance payouts, and random spikes get stripped so they don’t inflate — or distort — the true monthly average. Underwriters want the deposit pattern to reflect ongoing business activity, not a one-time event.
What Actually Gets a Declining-Year File Approved
Three things move a declining-year file from “flagged” to “cleared”: a documented explanation, evidence the decline has stopped, and a window selection that reflects the true trend. Miss any one of these and the file stalls or gets a smaller coverage figure.
Almost every bank statement program asks for one thing: a written letter of explanation. This letter should describe what happened and why it won’t keep happening. Maybe you lost a contract but already replaced it. Maybe you had a slow renovation season that has since picked back up. Maybe a one-time equipment purchase ate into your deposits for a few months. Supporting paperwork helps too. A CPA letter works. So does a business license showing you’re still operating, or recent statements showing the rebound already underway.
Underwriters are specifically looking for stabilization. If the most recent few months already show deposits back at or above the prior baseline, that’s the strongest possible evidence the down year was an anomaly rather than a trajectory. A borrower who can point to three or four recent months trending back up has a materially easier conversation than one whose most recent statement is also the weakest.
There’s also a flip pattern worth knowing: sometimes the prior year was the outlier, not the recent one. A single unusually strong year — a big contract, a one-time windfall — followed by a more typical year can look like a “decline” when it’s really a return to normal. Underwriters who spot this pattern generally don’t penalize the borrower for the prior year being unusually good rather than the current year being unusually bad.
Where the Line Actually Gets Drawn
A continuing, unresolved slide gets treated differently than a one-time dip. If deposits have been falling for several months in a row with no sign of leveling off, that file is harder to place. It’s not that one bad year disqualifies you — it’s that an active downward trend raises real questions about whether the business can keep supporting the payment going forward. In that situation, other loan structures come into play, including a sub-1.00 coverage approach available through select lenders in the network. Leverage and terms adjust when the number falls below full coverage, subject to underwriting.
Ownership percentage matters too. Business deposits only count in proportion to what the borrower actually owns. A 50% owner doesn’t get credit for 100% of the account’s deposits, and any mismatch between claimed ownership and actual deposits raises a flag independent of whatever the income trend looks like.
A Federal Backdrop, Briefly
Bank statement loans are non-QM products. Each lender underwrites them using its own program rules, not a government-set income-decline threshold. The federal Ability-to-Repay rule says lenders must verify and document income, assets, employment, and credit history before giving out a mortgage. But this rule lists factors to consider — it doesn’t give a specific formula for handling a down year, per the Consumer Financial Protection Bureau. That flexibility is exactly why bank statement programs can weigh a declining year based on its facts, instead of applying one fixed rule.
Conventional GSE underwriting handles self-employment income differently. Fannie Mae requires lenders to calculate the percentage of gross income spent on expenses, either yearly or in shorter periods, and track that trend over time using standardized tools, per Fannie Mae Selling Guide B3-3.2-01. Bank statement non-QM files skip that codified formula. Each lender’s own matrix controls instead. This cuts both ways: you get more flexibility, but also more variation from one program to the next.
Sizing the Loan If a Declining Year Is on the File
Through select wholesale programs, bank statement loans run from $300,000 to $30,000,000 across two distinct paths. A portfolio non-QM program carries files to $6,000,000. A separate bank portfolio jumbo program, which typically relies on 12 months of statements, carries files up to $30,000,000 on its own leverage ladder — roughly 65% to $5,000,000, 60% to $10,000,000, and 55% up to $30,000,000, with interest-only capped at 60% or the applicable ceiling, whichever is lower.
Leverage on a primary residence steps down as loan size climbs. On most files, borrowers see up to 90% around the $300,000-to-$1,000,000 band, stepping down through the mid-80s and mid-70s as size increases, with anything above roughly $4,000,000 reviewed case by case before submission — never a flat “up to” number at that level. Second homes and investment properties typically run about five points lower in leverage at every size tier, and a declining-year file often lands at the more conservative end of whatever band it falls into, since the underwriter is already pricing in extra scrutiny on the income side.
Credit floors typically sit at 660 on the portfolio program and 680 on the bank program, moving up to 700 above the super-jumbo threshold. Debt-to-income can run as high as 50% on most files. Reserve requirements typically scale with loan size — three months up to $500,000, six months up to $1,500,000, and nine months above that — plus additional reserves for other financed properties. A declining-year file with strong reserves and clean supporting documentation almost always underwrites more comfortably than one with thin reserves and no explanation letter, even at identical income levels.
Key Terms Defined
Bank statement loan — a mortgage that qualifies a self-employed borrower using deposits shown on personal or business bank statements instead of traditional personal-income documentation.
Expense ratio — a fixed or accountant-supported percentage deducted from gross business deposits to estimate the borrower’s actual take-home income.
Statement window — the 12- or 24-month period of consecutive bank statements a lender reviews to calculate average qualifying income.
Stabilization — documented evidence that a prior income decline has stopped and current earnings have leveled off or improved.
Letter of explanation — a written statement from the borrower describing the cause of an income dip and why it isn’t expected to continue.
DSCR loan — an investment-property loan that qualifies primarily on the property’s rental income rather than the borrower’s personal income documentation, subject to lender guidelines.
When a Bank Statement Loan Isn’t the Right Fit
Some declining-year files have a cleaner solution. An investor buying or refinancing a rental property doesn’t need to rely on personal or business deposits at all. A DSCR loan is reviewed mainly on whether the property’s own rental income covers the payment, subject to lender guidelines. This sidesteps the whole declining-year conversation for that purchase. That’s good to know if your declining year came from business income rather than rental performance. Lendmire’s complete DSCR loans guide walks through how this qualification path works, property by property.
For investors weighing both paths on the same purchase, it helps to see how bank statement income and property-level DSCR income actually compare side by side before choosing which one to submit.
Frequently Asked Questions
Does a 10% income decline get treated the same as a 40% decline?
No. A modest dip in the 10-15% range is usually a documentation exercise — an explanation letter and maybe a longer statement window resolve it. A steep, sustained decline of 40% or more with no sign of stabilizing draws far more scrutiny and may push the file toward a different structure entirely.
Can a borrower choose which statement window to submit?
Within the lender’s guidelines, yes, and picking the window that best reflects the true trend is standard practice. If the trailing 12 months look weak against a stronger prior year, submitting 24 months usually produces a better coverage figure than forcing the file through on 12.
What if the decline happened because of a single large one-time expense?
That’s exactly the scenario a letter of explanation is built for. Documentation showing the expense was a one-time event — an equipment purchase, a legal settlement, a renovation cost — rather than an ongoing drop in revenue helps the underwriter separate a temporary dip from a real trend.
Does a declining year on traditional personal-income documentation mean the same thing as a declining year on bank statements? Not necessarily. Tax-return net income can fall because of legitimate deductions while actual cash flow stays flat or even grows — That price-to-income gap is the entire reason bank statement programs exist for self-employed borrowers whose reported income understates what they actually earn.
Is there a minimum credit score required alongside a declining year?
Credit floors typically run 660 on the portfolio bank statement program and 680 on the bank portfolio program, moving to 700 above the super-jumbo loan-size threshold — a declining income year doesn’t change the credit floor, but it does make reserves and documentation carry more weight in the overall decision.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 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. Consumer Financial Protection Bureau – Ability-to-Repay/QM Compliance Guide
2. Fannie Mae Selling Guide B3-3.2-01
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.
