How a Bank Statement Loan Averages Deposits Across Two Years

The Quick Read: A lender totals the eligible deposits across the full lookback window, removes anything that isn’t real income, applies an expense factor to business accounts, and divides by the number of months. Over a two-year window that means dividing by 24, so a strong recent year gets blended with a weaker earlier one.

• Only eligible deposits count. Transfers between your own accounts, loan proceeds, refunds, and unexplained large deposits come out first.
• Personal accounts are usually credited without an expense haircut. Business accounts take an expense factor the lender sets.
• The average weights every month equally. It does not favor your best months or your latest ones.
• A 24-month window smooths lumpy or seasonal income but penalizes fast growth.

Self-employed borrowers often hit a wall with traditional personal-income documentation. Write-offs shrink the income line even when cash moves through the account every month. A bank statement loan is built for that gap. The part most borrowers misjudge is the arithmetic of the lookback window, and that is what this article walks through.

One scope note before the mechanics. A bank statement loan on a primary residence or second home is a consumer mortgage, so consumer disclosure rules apply. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from those disclosure rules. Everything below describes the income math, which works the same way either way. Lendmire’s complete DSCR loans guide covers the rental-property side in depth.

Key Terms Defined

Eligible deposit: A credit to the account that the lender accepts as genuine business or personal income.

Non-income credit: A deposit that isn’t earnings, such as a transfer from your savings, a loan advance, a refund, or a gift.

Expense factor: The percentage of business deposits the lender treats as operating costs rather than income.

Lookback window: The number of consecutive monthly statements the lender uses, typically 12 or 24.

Qualifying monthly income: The single monthly figure that comes out of the averaging and goes into debt-to-income, credit, and reserve checks.

What Does “Averaging Across Two Years” Actually Mean?

It means one pooled calculation, not two separate years. The lender gathers 24 consecutive statements, totals the eligible deposits across all of them, and divides by 24. Every month carries the same weight.

That detail matters. If year one averaged much less than year two, the pooled result lands between them. The underwriter may also look at the trend alongside the average, which is lender-dependent. Some programs treat a sharp decline with caution even when the 24-month average looks fine.

Across the wholesale network Lendmire works with, the 12-month version is the more common default and the 24-month version is its own product track with its own documentation rules. Programs differ by lender, so confirm which window a given program uses before planning a purchase around it.

The Two-Year Averaging Sequence, Step by Step

Here is how underwriting treats the file from statements to final figure.

1. Set the window. Statements typically cover 12 or 24 consecutive months. Scotsman Guide notes that lenders commonly ask for 12 to 24 months and want consistent monthly deposits.

2. Choose the account type. Personal statements are generally credited without an expense haircut. Business statements are reduced by an expense factor.

3. Total the deposits. For a 24-month look, that means 24 statements with no missing pages and no gaps.

4. Strip ineligible credits. Own-account transfers, loan proceeds, refunds, gifts, one-time asset sales, and large deposits with no documented source all come out.

5. Apply the expense factor (business accounts). The lender sets it. A lower figure usually requires a third-party profit and loss statement or a letter from a tax professional, where the program allows it.

6. Apply ownership share. If you own less than 100% of the business, many programs credit income in proportion to your stake.

7. Divide by the months in the window. Twenty-four months means dividing by 24.

8. Run the result through the rest of the file. The monthly figure feeds debt-to-income, credit, asset, and reserve checks like any other qualifying income.

Order of operations. Exclusions come first, because the haircut should apply only to real business revenue. The expense factor then reduces what remains, and ownership share applies to that result. Reversing the order can overstate or understate income, which is why underwriters fix a sequence.

What Counts and What Doesn’t

Underwriters screen deposits before averaging them because a bank statement loan, like any mortgage, still requires the lender to verify that you can repay. The CFPB’s Ability-to-Repay and QM rule compliance guide explains that Dodd-Frank set repayment-ability requirements for virtually all closed-end residential mortgages. A bank statement loan is a non-QM loan, so it sits outside the Qualified Mortgage documentation channel but still has to meet that standard. No federal rule sets the averaging method, the expense percentage, or the window. Those are lender and investor guideline choices.

Worked Example: The Same File Through Two Windows

The figures below are purely illustrative, not market data and not a program quote. To avoid dollar amounts, think in units. Suppose a self-employed borrower’s eligible monthly deposits average 18 units a month in year one and 28 units a month in year two.

The 24-month result is 23 because (18 × 12 + 28 × 12) ÷ 24 = 23. A growing business loses ground under the longer window. The same file with the trend reversed, 28 units falling to 18, would show the same 23 under a 24-month average, even though the business is shrinking. That’s why some underwriters read the trend in addition to the number.

Rising, Falling, and Seasonal Files

• Rising income. The 12-month window usually helps. The 24-month average drags the figure down toward the weaker first year.
• Falling income. The pooled 24-month figure can look better than current reality. Some lenders respond with a more conservative view, so expect questions about the decline.
• Seasonal or lumpy income. The 24-month window helps most here. It smooths a very strong quarter and a very slow one into one steady figure.

What Happens to Weak or Missing Months?

Every month inside the window is in the denominator. A zero month still counts as a month. A gap in statements is a documentation problem, not a way to drop a bad month. Some lenders may let you explain a one-off disruption in writing, but the explanation doesn’t remove the month from the math.

Personal vs. Business Statements

Most lenders won’t accept personal and business funds mixed in one account, though some will. Programs also vary in how they credit ownership, with some crediting income in proportion to the stake. Treat that as anecdotal and confirm against the actual program sheet.

Asset-heavy businesses need extra attention. Scotsman Guide cautions that a one-size-fits-all approach to expenses may cause denials for those businesses, which is why a documented lower expense factor can matter.

What Pulls the Average Down

• Mixing personal and business deposits in one account.
• Moving cash between your own accounts and leaving the credits in the total.
• Missing statement pages or unreadable statements.
• Large deposits with no paper trail.
• Owner draws or pass-through deposits that get excluded or counted twice.
• A weak first year inside a 24-month window.

Why the Number Differs From Your Tax Return

A tax return reports taxable profit after deductions, including non-cash items like depreciation. Bank deposits show the cash that actually moved through the account. The gap comes from timing, non-cash write-offs, and cash retained in the business. That’s why deposit averaging can show more income than a return, and why the underwriter, not the borrower, decides the final figure.

Where the General Rule Breaks

• Declining deposits. A 24-month average can overstate current earnings. Expect scrutiny, and in some programs a shorter or more conservative view.
• Commingled accounts. Accepted by a minority of programs, with extra documentation.
• Partial owners. Ownership share can cut credited income sharply.
• Asset-heavy operations. A flat expense factor may understate income until a professional documents the actual cost structure.
• Rental purchases. A bank statement loan puts your personal debt-to-income in play. A DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, skips that. For many self-employed investors buying a pure rental, DSCR is the cleaner lane.

How the Investor Decision Plays Out

Across the wholesale network Lendmire works with, bank statement files tend to succeed or fail on cleanliness more than on income size. Separate accounts, sourced large deposits, and a profit and loss statement ready to support a lower expense factor make the underwriter’s job easier. Files with commingled funds and unexplained transfers draw the most conditions.

On leverage, primary-residence purchase and rate-term loans reach up to 90% LTV through select lenders, with stronger files earning the top of the range. Owner-occupied cash-out on a primary residence or second home runs up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio, depending on loan size and credit. Investment-property cash-out tops out around 75% LTV. Investment purchase leverage on bank statement documentation varies by lender. An asset-depletion alternative qualifies from liquid assets up to about 80% LTV on a primary residence. Loan sizes run roughly $125,000 to $3,500,000, and reserves commonly sit around six months of the housing payment. All of it is subject to lender guidelines and individual underwriting.

If you’re weighing this against waiting for traditional personal-income documentation to catch up, Lendmire’s piece Bank Statement Mortgage vs Waiting Two Years for Owner-Operators lays out the tradeoff. And if you’re gathering paperwork, how to document two years of deposits covers the file-building side.

Pre-Application Self-Check

1. List 24 months of eligible deposits and mark every transfer, refund, and loan credit. 2. Compute the pooled average and the most recent 12-month average. 3. Note which window flatters you and whether income is rising or falling. 4. Ask for the expense factor and window in writing before planning around them. 5. Line up a profit and loss statement or tax professional letter if a lower expense factor would help.

Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

A DSCR investor loan, arranged through select lenders in a 41-market footprint that includes Washington, D.C., is the alternative worth pricing for a pure rental purchase. Not a commitment to lend; qualification is subject to lender guidelines.

About Lendmire

As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 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).

References

1. Scotsman Guide, “Don’t Shut the Door on Quality Borrowers”

2. CFPB Ability-to-Repay and QM Rule compliance guide