How Bank Statement Loan Expense Factors Work and When a CPA Letter Helps

The Quick Read: Lenders turn average monthly deposits into qualifying income, and on business accounts they first cut those deposits by an expense factor that stands in for overhead, while a CPA letter is an optional document that may replace the default factor with your real expense ratio on programs that allow it.

• Across the wholesale network Lendmire places files with, the documentation window is typically 12 months of personal or business statements.
• Personal-account deposits are commonly counted in full. Business-account deposits take the expense factor.
• The factor is a lender or program setting. No law or rule fixes it, and the borrower cannot pick it.
• A letter helps most when real overhead is low. It does nothing for a business whose costs already exceed the default.
• Occupancy decides the disclosure regime: owner-occupied files are consumer mortgages, while non-owner-occupied rentals are business-purpose.

Most self-employed borrowers learn about the factor late, usually when a pre-approval comes back smaller than the deposits suggested. This guide explains the mechanics first. It then covers where the general rule breaks and how to decide whether a letter is worth the effort.

Key Terms Defined

Expense factor: the percentage of business deposits a lender treats as overhead rather than income.

Eligible deposits: the deposits left after the lender removes transfers between your own accounts, loan proceeds, refunds, and one-off lumps.

CPA expense letter: a signed letter from a CPA, enrolled agent, or other qualifying tax preparer that certifies the business’s actual expense ratio.

Profit-and-loss (P&L) statement: a summary of revenue and costs for a stated period, which some programs accept when a third-party tax professional prepared or reviewed it.

Ownership share: the percentage of the business you own, which limits how much of its deposits count toward your income.

DTI (debt-to-income ratio): monthly debts divided by monthly qualifying income, which together with the income figure sets how large a loan you can carry.

How Do Expense Factors Turn Deposits Into Income?

The lender starts with your statements, removes what is not real income, applies the factor to business accounts, and divides by the number of months. That result is your qualifying income. The steps run in a fixed order.

1. Choose the account type. Business-account deposits get an expense factor. Personal-account deposits are commonly counted at 100% of eligible deposits, since no business overhead is assumed to sit inside them.

2. Pull the statements. On the programs in Lendmire’s network, the window is typically 12 months. Scotsman Guide’s non-QM explainer describes the broader market range as 12 to 24 months.

3. Strip ineligible deposits. Transfers between your own accounts, loan proceeds, refunds, and one-time lumps come out first.

4. Adjust for ownership. If you own part of the business, only that share of deposits counts.

5. Apply the factor. Eligible deposits, times ownership share, times one minus the factor, divided by the number of months, gives qualifying income.

6. Test the result against debts. Qualifying income feeds your DTI, and the pair sets the loan size.

The same Scotsman Guide piece uses 50% as its example of a standard factor. Treat that as an illustration of the concept. Across the programs Lendmire sees, the starting factor varies by lender, business type, and how the file is documented, so no single number applies to everyone.

Worked Example: One Borrower, Three Outcomes

The same deposits can produce very different qualifying income depending on the factor. The table below uses illustrative percentages only. Real factors are set by the lender’s program sheet.

Ownership share compounds the effect. A 50% owner under a 50% factor counts roughly a quarter of the business’s eligible deposits. Qualifying income drops fast at that point, so a high-deposit business can still produce a modest number.

The third row matters. A certified ratio above the default would shrink your income. Because the letter is optional, a borrower who never submits it keeps the default. Get a rough sense of your own ratio before paying anyone to certify it.

What Changes the Starting Factor

Lenders adjust the starting factor based on how much overhead a business plausibly carries. The pattern is consistent across programs, even though the numbers differ.

A solo service provider with no employees and few supplies usually sits at the lighter end. A business with staff, inventory, subcontractors, or vehicles sits closer to the default or above it. Deposit consistency matters too. Steady monthly deposits read as a stable business, while lumpy or declining deposits invite a harsher view.

The account structure also counts. Owner transfers from a business account into a personal account are commonly counted in full, so the way money moves can change the result. Do not rearrange accounts just before applying. Underwriters scrutinize new patterns, and a sudden change looks like an attempt to manage the number.

What a CPA Letter Is and What It Must Contain

A CPA letter is a third-party document that states your business’s actual expense ratio. On programs that accept one, it can replace the default factor. The borrower cannot certify it personally.

Most lenders want the same core elements:

• the preparer’s name, credential, and contact details;
• the business name and your ownership share;
• the certified expense ratio as a percentage;
• the period the ratio covers, matched to your statement window;
• confirmation that the preparer has prepared or reviewed the business’s returns.

The lender decides whether to accept the letter and what format it needs. Ask for that format in writing before your accountant drafts anything. The principle behind it is old. The CFPB’s ability-to-repay compliance guide says a profit-and-loss statement can verify self-employment income when an accountant or other appropriate third party prepared or reviewed it.

When a CPA Letter Helps

A letter helps when your real overhead sits well below the default factor and you can document it. Check the points below before you call your accountant.

• You run a solo or near-solo service business. Consultants, designers, and many professional practices carry little cost of goods and few payroll lines.
• Your tax deductions are mostly non-cash or personal-use items. Depreciation and home-office deductions lower taxable income without draining your accounts, so a lender looking at deposits sees a stronger picture.
• The file is tight on DTI. A lower certified ratio raises qualifying income, which raises DTI headroom. A larger loan needs more income, so the factor matters more as balances grow.
• Your deposits are steady. A letter works best when the statements tell the same story as the ratio.

Picture two borrowers with identical deposits. One is a consultant who works from home with no staff. The other runs a landscaping crew with trucks and payroll. The consultant may gain real buying power from a letter. The crew owner will probably see a certified ratio above the default, which means the letter would hurt.

When a Letter Does Nothing or Backfires

A letter fails to help in four common situations.

Your real costs exceed the default. Staffed businesses and product businesses often fall here. Skip the letter and keep the default.

You qualify on personal statements. The factor does not apply, so there is nothing for the letter to replace.

The program does not accept one. Some programs use fixed tiers only. Few lenders allow a CPA-stated ratio, so ask which programs on your file do before you pay for a letter.

It costs you leverage. On owner-occupied cash-out files, select lenders in Lendmire’s network go up to 80% LTV with a fixed expense ratio. The ceiling is 75% LTV when the ratio comes from an accountant-prepared letter, subject to loan size and credit. A letter that raises income but lowers leverage is a real tradeoff, and the right choice depends on whether income or equity is your binding limit. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

This is a genuine toss-up on many cash-out files. If DTI is the constraint, the letter may be worth the lower ceiling. If you need the most equity you can reach, the fixed ratio may serve you better.

Fixed Factor vs CPA Letter vs P&L

The three documentation paths differ in effort, who produces them, and how much scrutiny they draw.

A P&L is a separate documentation path, not a variation of the letter. Scotsman Guide lists the P&L and a tax-professional expense statement as alternatives to the standard factor. Program availability differs by lender.

Why Underwriters Push Back on Letters

An underwriter tests the certified ratio against what the statements show. Four problems come up most often.

• A period mismatch. The letter covers a different span than your statements.
• A ratio that does not match visible spending. If the letter certifies low overhead but the statements show steady payroll and supplier payments, the number loses credibility.
• An unqualified signer. The preparer must hold an acceptable credential.
• Commingled accounts and large unexplained deposits. These need documentation such as invoices or contracts before they count.

The fix is reconciliation before submission. Add up your actual business outflows from the statements and compare the total to your accountant’s ratio. If the two are far apart, resolve that gap first. A letter that fails review costs time and can harden the lender’s view of the file.

Where the General Rule Breaks

Several situations bend the standard mechanics.

Occupancy decides the disclosure 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. Know which applies to your property before you compare programs.

DSCR files ignore all of this. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, and generally does not review personal income. A CPA expense letter has no role there. Lendmire’s comparison of DSCR and bank statement loans for investors covers that split in more detail.

Second homes follow the owner-occupied rules. The expense-factor and letter tradeoffs apply, and Lendmire’s piece Expense Factor vs CPA Letter on a Second Home Bank Statement Loan goes deeper on that case.

Large loans change the rigor. Loan sizes on these programs run from roughly $125,000 to $3,500,000, and the upper end draws closer review of income and reserves, which commonly run about six months of the housing payment.

Partial ownership shrinks the number. Only your share of deposits counts, so a minority stake often produces too little income to matter.

Common Misconceptions

The factor is a federal rule. It is a lender setting. The CFPB guide sets verification standards, not an expense formula.

These loans skip documentation. They use a different document set, not a smaller one. Per CFS Review’s summary of CFPB guidance, a non-QM lender must still verify the income or assets it relies on with reliable third-party records specific to the consumer.

Qualifying income equals deposits. Deposits are screened, and then business accounts take the factor.

A letter is required. It is an optional override, and only where the program permits one.

The borrower picks the factor. The lender sets it from the program, the business type, and the documentation.

What the Decision Looks Like in Practice

Start with the property. A bank statement loan on a primary residence or second home is reviewed on documented income under the applicable program, subject to lender guidelines. On a primary residence, select lenders in Lendmire’s network go up to 90% LTV on a purchase or rate-and-term refinance, with the strongest files earning the top of that range. An asset-depletion alternative, which qualifies from liquid assets, runs to about 80% LTV on a primary residence.

Investment properties follow different math. Cash-out on an investment property tops out around 75% LTV. Investment purchase leverage on bank statement documentation varies by lender, and investor-focused leverage guidance belongs on the DSCR side.

Scaling is where the two lanes diverge. On a bank statement file, each new mortgage adds to personal DTI. DSCR files are generally not described as counting against it, though reporting varies by lender. Many self-employed investors use a bank statement loan for their own residence and DSCR financing for entity-held rentals, subject to program eligibility on each file.

A practical sequence works for most borrowers:

1. Decide the property type and occupancy first. 2. Estimate your overhead from the last 12 months of statements. 3. Ask which programs on your file accept a letter and what it costs in leverage. 4. Request the letter only if your ratio sits clearly below the default. 5. Reconcile the certified ratio to the statements before submitting.

For the full picture of how Lendmire’s investor lane fits beside this one, see the complete DSCR loans guide. Tax treatment varies, so consult a qualified professional before relying on any deduction.

Next Step

Lendmire is a broker that arranges these loans through select lenders in its wholesale network, and its consumer mortgage licensing covers 16 states. Every file is underwritten individually, subject to lender guidelines, and nothing here is a commitment to lend. You can reach the team at 828-256-2183.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Scotsman Guide, Rev Up the Engine for Non-QM Lending

2. CFPB, Ability-to-Repay and Qualified Mortgage Rule Compliance Guide

3. CFS Review, CFPB Addresses Non-QMs Under Ability-To-Repay Rule