How Income Is Calculated for a 24-Month Bank Statement Loan?

The Quick Read: Lenders turn 24 months of deposits into one monthly figure by removing deposits that are not real income, applying an expense factor to business accounts, scaling by the borrower’s ownership share, and dividing by 24. The result is the qualifying income, and it is not the sum of every deposit divided by 24. That figure then goes through the lender’s debt-to-income and credit review, subject to lender guidelines.

• Transfers, loan proceeds, refunds, and one-time windfalls come out before any averaging.
• Personal statements generally count eligible deposits with no expense factor; business statements get an expense factor.
• The lender sets the expense factor, not the borrower.
• Ownership share scales the result when the business is not wholly yours.
• Deposit trend over the 24 months can raise or lower the figure.

Lendmire is a mortgage broker that places these files through select lenders in its wholesale network. The mechanics below come from how those files are built, not from a single lender’s sheet. Programs differ at the edges, so treat each step as the common pattern.

What Is the Calculation, Step by Step?

The process runs six steps, and the only part that varies much between lenders is the expense factor. Gather the statements, screen the deposits, apply the account-type rule, apply ownership share, average, then test the result against debt-to-income and credit.

1. Collect 24 consecutive months of statements. These come from personal or business accounts. Expect a business narrative, proof of self-employment history, and ownership documents alongside them. Gaps in the months are a problem.

2. Screen the deposits. The underwriter strips out transfers between accounts, loan proceeds, refunds, and one-time windfalls. What stays is money traced to a recurring, legitimate source.

3. Apply the account-type rule. Personal statements generally count eligible deposits without an expense factor. Business statements are reduced by an expense factor to back out overhead, payroll, and materials.

4. Apply ownership share. The result is multiplied by the borrower’s percentage of the business. Programs typically require a minimum ownership stake before business statements can be used.

5. Average. Divide by 24. The answer is monthly qualifying income.

6. Test it. The figure goes through the lender’s debt-to-income and credit tests. Declining income and overdraft activity can shrink it or sink the file.

In symbols: monthly income equals eligible deposits, times one minus the expense factor, times ownership share, divided by the number of months. For personal statements the expense factor drops out.

Key Terms Defined

Eligible deposit: A deposit the underwriter accepts as business or personal income after screening out transfers, loan proceeds, and one-offs.

Expense factor: The share of business deposits the lender assumes goes to operating costs rather than to you.

Lookback period: The number of months of statements averaged, here 24.

Ownership share: Your percentage of the business, which scales how much of its deposits count as your income.

Qualifying income: The monthly figure the lender uses in its debt-to-income test.

Which Deposits Count and Which Don’t?

Deposits that just move money around, such as transfers between your own accounts, do not count as income. Underwriters read the statements line by line, so how a deposit looks matters as much as what it is.

Picture a contractor whose business account shows steady client deposits plus a large transfer from a personal savings account and a one-time equipment-sale deposit. The client deposits stay. The other two come out before anything is averaged. Borrowers who skip this step in their own estimate usually overshoot what the file will support.

Commingled accounts make this harder. When personal and business money run through one account, tracing each deposit takes more documentation, and some deposits get excluded simply because they can’t be tied to a source. Keeping business deposits in a business account is the cleanest habit.

Personal vs. Business Statements: What Changes?

Personal statements are simpler because eligible deposits generally count without an expense factor. Business statements get the factor, which is why the same deposit totals can produce very different qualifying incomes depending on account type.

Some personal-statement programs ask for a couple of months of business statements to show the business is operating. That is a confirmation step, not a second income calculation.

How the Expense Factor Works

The expense factor is the biggest single lever on qualifying income. The lender picks it based on business type, and borrowers cannot choose their own. Consumer finance reporting notes that lenders weigh factors such as business type, employees, and physical location when setting it.

Across Lendmire’s wholesale network, the common pattern is a flat percentage applied to business deposits. A lower factor is sometimes available when a CPA letter or a third-party-prepared profit-and-loss statement supports it. Figures differ by lender, so no single number applies to every file. Some programs instead take the P&L as the income source, in which case deposits must reconcile to P&L revenue within a tolerance the lender sets.

Low-overhead businesses, such as consulting or other service work with few employees and little inventory, are the ones most likely to benefit from a CPA-supported lower factor. A business with payroll, materials, and equipment costs will usually carry a heavier factor, and a CPA letter will not change that if the books show the costs.

A Worked Walkthrough (Using Ratios, Not Dollars)

Consider a self-employed borrower with a single-member business account. Over 24 months, deposits total some amount. After the underwriter removes transfers and a one-time deposit, the remaining eligible deposits are a bit lower. Apply the lender’s expense factor, and roughly half or more of that figure may fall away, depending on the factor. Ownership is 100%, so no scaling. Divide by 24. That is qualifying income.

Now run the same borrower on personal statements into which the same client payments are deposited. With no expense factor, the same eligible deposits produce a notably higher monthly number. The catch: personal-account deposits are only as clean as their paper trail. If transfers and client payments mix, more gets excluded, and the gap narrows.

Both versions then feed the debt-to-income test. Higher qualifying income lowers the ratio and raises the borrowing ceiling. This is why account type and the expense factor, not deposit volume alone, decide the outcome.

What Can Shrink Your Number?

Most shortfalls come from preventable file problems, not from the loan program itself.

• Commingled accounts. Deposits that can’t be traced to a source get excluded.
• Transfer-heavy accounts. Money shuffled between your own accounts is stripped out.
• Undocumented large deposits. Without a source, they are excluded.
• Mismatched P&L and deposits. When a P&L is used, deposits that don’t reconcile to its revenue cause a problem.
• Declining deposits. A downward trend in the later months can lead the underwriter to use a lower figure than the 24-month average.
• Overdraft activity. Repeated overdrafts signal cash-flow strain.
• Missing months. The window needs consecutive statements.

The 24-month window smooths seasonality and one-off spikes. It also gives the underwriter more history in which to find a bad stretch. If income has risen sharply recently, a shorter window may show more. Lendmire’s piece How Income Is Calculated For A 12-month Bank Statement Loan? covers that shorter window.

Why Bank Statements Instead of Tax Returns?

Traditional personal-income documentation shows income after deductions. A self-employed investor with heavy write-offs can show low adjusted income on paper while the bank account tells a different story. A bank statement loan reads the deposits instead. Whether it shows more income than returns depends on how large the deductions are relative to the expense factor. A low-expense business with a clean return may do as well or better on returns.

This is still a fully underwritten loan. Income, assets, and employment must be verified using reliable third-party records, as the NCUA’s Regulation Z exam procedures describe, and credit history is one of the factors reviewed. The difference is the method of proving income. Bank statements are alternative income documentation, which is why these loans fall outside the standard qualified-mortgage definition described in the CFPB’s General QM final rule.

A bank statement loan is reviewed on documented income under the applicable program, subject to lender guidelines. A DSCR loan is a separate product aimed at rental properties that qualifies primarily on property-level rental income covering the payment. Lendmire’s complete DSCR loans guide covers that side.

Where Bank Statement Loans Fit for Investors

Occupancy decides the regime. An owner-occupied file, meaning a primary residence or second home, is a consumer mortgage and TRID disclosures apply. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from TRID. Keep the two straight when planning a purchase.

Typical leverage through select lenders in the network:

• Primary residence purchase or rate-term: up to 90% LTV, with stronger files earning the top of the range.
• Owner-occupied cash-out (primary or second home): up to 80% LTV, using a fixed expense ratio, or 75% with an accountant-prepared ratio, depending on loan size and credit.
• Investment-property cash-out: up to about 75% LTV.
• Investment purchase on bank statement documentation: varies by lender.
• Asset-depletion alternative on a primary residence: up to about 80% LTV.
• Loan amounts run roughly $125,000 to $3,500,000, with reserves commonly around six months of the housing payment.

All of this is subject to lender guidelines, and every file is underwritten individually. Programs of this type carry higher upfront costs than agency loans, so weigh that against the benefit of income-based qualification.

Tax treatment varies; consult a qualified professional.

Prepare Your Own Estimate

Before calling anyone, run the numbers yourself.

1. Pull 24 months of statements and confirm none are missing.

2. Mark every transfer, loan deposit, refund, and one-time deposit, and subtract them.

3. Decide whether you would use personal or business statements.

4. Assume a heavy expense factor for business accounts, since the lender sets it.

5. Multiply by your ownership share and divide by 24.

6. Run the same on 12 months and compare.

Treat the result as a rough ceiling, not a promise. Underwriters often find more to exclude than a borrower does.

Call 828-256-2183 or request a quote.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. NCUA Regulation Z exam procedures

2. CFPB General QM final rule