Does the Expense Factor Shift Between 12 and 24 Bank Statements?

The Quick Read: Usually no, because the expense factor follows your business profile, not the length of the statement window. Moving from 12 to 24 months changes the deposit average the lender uses, and that is what moves your qualifying income.

• The expense factor is a percentage the lender removes from business deposits to estimate overhead.
• The window changes the divisor and the deposits in the average, not the percentage.
• Personal-account deposits are often counted at or near 100%, so account type moves income more than the window does.
• A CPA-prepared ratio can change the factor, and it has to cover the same months as the statements.
• Programs differ, so ask your loan officer to run both windows in writing.

Self-employed borrowers ask this question for a good reason. Two years of deposits feels like a bigger, safer file. Does it also trigger a harsher haircut? In almost every program we place files with, it does not. This article walks through why, where the answer bends, and how to pick the window that fits your income.

One scope note up front. This is about bank-statement loans, which qualify on documented income under the applicable program, subject to lender guidelines. It is not about DSCR loans. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. For rental purchases, that is usually the better tool, and Lendmire’s complete DSCR loans guide covers it.

Key Terms Defined

Expense factor: the percentage of business-account deposits the lender treats as operating costs and subtracts before counting income.

Lookback window: the number of consecutive months of statements the lender averages. Programs commonly use 12 or 24.

Qualifying income: the monthly income figure that results from the averaging and the factor. It feeds the debt-to-income check.

Eligible deposits: deposits that count as income. Transfers between your own accounts, loan proceeds, and refunds come out.

Debt-to-income ratio (DTI): your monthly debts divided by your qualifying monthly income. Bank-statement loans on owner-occupied homes still use it.

CPA-prepared ratio: an expense percentage documented by your accountant, offered in place of the lender’s default.

What Is the Expense Factor Actually Tied To?

The factor is tied to what your business is, not how many months you submit. Business type, headcount, contractor use, and operating structure drive the percentage. Statement count is not on that list. Across our wholesale network, we have not seen a program that raises the haircut simply because you chose the longer window.

Here is the sequence most programs follow. You choose the account type: personal, business, or both, as the program permits. You submit consecutive statements for the lookback. The lender strips out ineligible deposits. It averages what remains, then applies the factor to business deposits. The result is monthly qualifying income.

The formula looks like this: monthly qualifying income equals average eligible deposits times one minus the expense factor. The factor sits inside that equation as a fixed input. Change the window and you change the first term. The second stays put.

A federal point helps explain why this is a lender choice. The federal consumer-finance regulator’s repayment-capacity compliance guide says a creditor must verify the income it relies on using reasonably reliable third-party records. It does not dictate a particular underwriting model. So no regulation sets a 50% factor, or any other number. The factor is a program decision, and it varies by lender and by business type.

What Does Change When You Move Between Windows?

Your average deposit changes, and so does your qualifying income. A 12-month window averages the most recent year. A 24-month window blends the older year in. If your deposits rose, the longer window drags the average down. If they fell, it pulls the average up, though underwriters may look harder at the trend.

Run a generic example. Say the business deposits in year one index at 125 and in year two at 100, on a scale where higher means more income. The 12-month window reads 100. The 24-month window reads 112.5. Now apply one constant factor to both. Each result shrinks by the same percentage. The gap between the windows stays the same proportion, and the deposit trend alone sets it.

That is the heart of the confusion: the expense factor is applied to both windows alike, so the choice of window changes the average because of the deposit trend alone.

Outlier months matter more in the short window. One large deposit weighs one-twelfth of a 12-month average, versus one-twenty-fourth of a 24-month average. Underwriters may ask for invoices or contracts to support a spike. A longer window dilutes the spike, but it also dilutes a genuine recent surge.

Read the last column down. That is the answer to the title question in one line.

What Moves Your Income More Than the Window?

Account type usually does. Personal-account deposits are often counted at or near 100% of eligible deposits, while business-account deposits take the factor. If a program lets you qualify on personal statements, you may see a bigger income change from that choice than from switching windows. Many self-employed borrowers mix personal and business spending in one account, which is exactly where this lever gets pulled. Programs set their own rules on which accounts you may use.

Three other levers beat the window:

• A documented lower ratio. If your accountant prepares an expense ratio below the lender’s default, the factor itself can drop. The cash-out programs in our network, for example, treat an accountant-prepared ratio differently from the fixed one. Lendmire’s piece How to Use a CPA Letter to Lower the Expense Factor on Bank Statements goes deeper.
• Clean deposits. Every transfer, refund, or loan deposit you can’t explain comes out of the average. The CFPB guide also says a creditor must confirm that unidentified deposits are income and not loan proceeds. Label your deposits before the lender asks.
• Ownership share. If you own part of the business, the lender prorates income to your share. A partner with a minority stake sees a smaller number on the same deposits.

The CPA Letter and the Window

A CPA letter can change the factor, and it has to match the statements. If your accountant certifies a ratio for twelve months and you move to 24, the letter generally needs to cover the longer period. The ratio may even differ, because your costs over two years may not match your costs over one. That is a documentation effect, not a rule change.

This is the one place the answer to the title question bends. The factor does not shift because of the window. It can shift because new paperwork supports a different ratio over a different period. Check the lender’s guidelines on whether the letter’s date range must line up with the statement range. Most programs want it to.

For contrast, consider how agency-style underwriting treats self-employed income. Fannie Mae’s Selling Guide uses a cash-flow analysis built on tax-return forms. Bank-statement programs replace that tax-return method with deposits. They are a separate structure, with their own factors and their own rules.

What If You Switch Windows Mid-File?

Switching changes some inputs and leaves others alone. Here is the order most files follow.

1. Your lender pulls the additional months of statements. 2. Deposits are screened again for transfers, refunds, and loan proceeds. 3. The average is recalculated over 24 months instead of 12. 4. The factor stays the same, unless the program or your CPA documentation changes it. 5. Qualifying income is recomputed, and DTI, credit, and reserves are rechecked.

Notice what is not on the list: a new factor. If a lender tells you the percentage changed, ask why. The answer should be a different business profile, a new CPA ratio, or a program that sets different tiers by window. Those are real, but they are program-sheet details, not a general rule. A few lenders in our network publish different treatment by window; most do not.

How Do You Choose the Window?

Choose by your income trend, not by the factor. If your business grew recently, 12 months usually shows the most income. If your income is seasonal or one-year-lumpy, 24 months smooths it. If income fell, a longer window is not a safe harbor. Underwriters scrutinize declining trends in either window.

A quick self-test before you apply:

• Add up eligible deposits for the last 12 months and for the last 24 months.
• Divide each by its month count.
• Apply the same factor to both, using your accountant’s ratio if you have one.
• Compare. The higher number is the window to ask for.

Then ask your loan officer to run both calculations in writing. Lenders can usually work with whichever window you document.

A practitioner note: files in this lane often stall on documentation, not on the math. Gaps in the statement chain, deposits nobody can explain, and a CPA letter dated to the wrong months cause more trouble than the choice of window. Fix those first.

Where Do Investors Fit?

Self-employed investors use bank-statement loans in two main places. One is an owner-occupied purchase or refinance. The other is a cash-out against a property you live in or hold as a second home. For a rental purchase, the better tool is usually a DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. It does not rest on your personal deposits.

Leverage depends on the transaction. On a primary residence purchase or rate-term refinance, select lenders in our network go up to 90% LTV, and stronger files earn the top of the range. On an owner-occupied cash-out, whether primary residence or second home, the ceiling is up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio, by loan size and credit. On an investment-property cash-out, the ceiling is around 75% LTV. Investment purchase leverage on bank-statement documentation varies by lender. Loan sizes typically run from $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 is not a commitment to lend.

Occupancy decides the paperwork regime too. An owner-occupied file is a consumer mortgage. A bank-statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from the consumer disclosure rules that apply to owner-occupied loans. Short-term rental rules vary by city, county, HOA, and property type, so confirm local rules before relying on projected rental income.

Consumer mortgage licensing for this lane covers 16 states, so availability depends on where the property sits. Tax treatment varies; consult a qualified professional.

Common Myths, Quickly Corrected

“A longer window means a lower factor.” Not directly. The factor follows the business profile. The average changes.

“24 months is always safer or higher.” Not if income declined. A growing business may do better on 12.

“Bank-statement loans skip verification.” They don’t. Lenders verify through statements, and the CFPB guide requires reasonably reliable third-party records for relied-on income. Alternative documentation is still documentation.

“50% is the law.” It is a common lender default, not a regulation. Ranges vary by program and business type.

“The window and the factor are the same decision.” They are two separate inputs. Treat them separately and you will compare offers better.

Reach the team at 828-256-2183 or request a quote.

Whichever window you pick, remember the lender is averaging your deposits, not judging your business, so clean statements and matching paperwork do more for your file than any choice of months.

For current guidelines and terms, see Lendmire’s bank statement loan programs page.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB Ability-to-Repay and Qualified Mortgage Small Entity Compliance Guide

2. Fannie Mae Selling Guide: Underwriting Factors and Documentation for a Self-Employed Borrower