The Quick Read: Lenders run three separate reviews on this loan: your income, the property’s value and condition, and your insurance coverage. The roof never enters the income math, but it can change the appraisal and the insurance file. Either of those can stall an otherwise strong application.
- Income comes from 12 months of bank statements, averaged after the lender removes non-income deposits and applies an expense factor.
- The appraiser reports the roof as it stands today, and the lender may require repairs or a re-inspection before funding.
- An insurance payout is not income, and an open claim changes what paperwork the lender asks for.
- Cash-out leverage tops out at 80% LTV on a primary residence with a fixed expense ratio, with lower ceilings for other occupancies.
Key Terms Defined
Bank statement loan: A mortgage that is reviewed on documented income under the applicable program, subject to lender guidelines, using deposit history instead of tax returns.
Cash-out refinance: A new mortgage that pays off the old one and hands you the difference in cash.
Expense factor: The share of business deposits a lender treats as operating costs rather than income.
LTV (loan-to-value): The loan balance divided by the appraised value of the property.
As-is value: What an appraiser says the property is worth in its current condition, damage included.
RCV and ACV: Replacement cost value pays for repair without subtracting age. Actual cash value pays the depreciated amount.
Reserves: Liquid savings the lender wants you to hold after closing, with the required amount varying by file and lender.
What Is This Loan, Really?
Think of it as a normal cash-out refinance with a different way of proving income. A self-employed owner often shows tax returns with heavy write-offs. Those returns can understate what actually flows through the business. A bank statement program looks at deposits instead.
Alt-doc lending is a large part of the non-QM market. (Non-QM means the loan sits outside the standard rules agencies use to buy mortgages.) The CFPB’s own rulemaking material calls alternative-documentation loans, such as bank statement loans, the largest non-QM subsector. You can see that in the CFPB’s seasoned QM proposal.
Here is the part people miss. Lighter paperwork is not lighter underwriting. The lenders Lendmire places files with still document your ability to repay. They just document it differently.
Nothing in these programs mentions roofs or storms specifically. A roof problem rides along on the same three tracks every cash-out file follows. The sections below walk through each one in the order an underwriter sees them.
Step One: How Deposits Become Income
An underwriter turns twelve months of statements into one monthly income figure. The steps are consistent from lender to lender, even when the details differ.
1. Pull the statements. The standard window is 12 months of business or personal statements.
2. Strip out non-income deposits. Transfers between your own accounts, loan proceeds, refunds, and one-time windfalls come out.
3. Source the large deposits. An oversized credit needs a paper trail, such as an invoice or a client payment record.
4. Apply the expense factor. Business-account deposits are reduced to reflect operating costs. Personal-account deposits are usually treated differently.
5. Average the result. The adjusted total, divided across the window, becomes monthly qualifying income.
The expense factor is set by the program, not by you. Across Lendmire’s wholesale network, factors vary, and a few lenders will use an accountant-prepared ratio in place of a fixed one. Here is an index example, not any program’s real factor. Say a business account averages 100 units of clean deposits a month, and a lender’s factor removes a third of them. Qualifying income is about 67 units. A lender using a smaller factor would count more of the same deposits.
That is why shopping matters on a self-employed file. The same statements can produce noticeably different income at different lenders.
The underwriter then compares that income to your total monthly obligations, including the new mortgage. Debt-to-income is the final check on this track. Notice that the roof has not appeared.
Step Two: Where the Roof Enters the File
The roof shows up in the appraisal. The appraiser walks the property and reports its condition, and a worn or damaged roof can pull down the as-is value. The appraiser may also flag it as a condition the lender must address.
Three outcomes are common:
- The damage is minor and noted. The appraisal proceeds, and the lender may ask for documentation of the repair plan.
- The damage affects value or habitability. The lender may require the repair before funding and then a re-inspection.
- The damage blocks insurance. The lender usually cannot fund until acceptable coverage is in place.
Agency programs often use roof remaining-life tests. Those tests do not automatically apply to a non-QM bank statement loan. Each program sets its own property-condition rules, and some lenders in the network are stricter than others.
One more point trips up borrowers who plan to fix the roof before the appraisal. A new roof may support a higher appraised value, depending on comps and underwriter review. In a BiggerPockets discussion on doing the roof before a cash-out refinance, investors generally agreed that a roof helps the appraisal mostly when the old one was failing. A sound roof that gets replaced early rarely moves the number much.
Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
Step Three: Insurance and the Claim
The lender needs hazard coverage it can accept. Storm damage puts that coverage in the spotlight, and an open claim adds paperwork.
The most important distinction is between replacement cost and actual cash value. The National Association of Insurance Commissioners explains that replacement cost coverage pays to repair or replace without deducting depreciation. Actual cash value coverage pays the depreciated amount. On an older roof, that gap can be large.
In practice, a replacement-cost claim is often paid in two stages. The first payment is the depreciated amount, and the withheld portion is released after the work is done. The check may name your mortgage lender as co-payee, which complicates things when you refinance mid-claim. Many carriers also pay wind and hail roof losses on an age-based schedule, so a deductible plus depreciation can leave a gap between the payout and the contractor’s bill.
That gap is often why owners reach for a cash-out in the first place. It is also why claim sequencing matters, and the order is the same on nearly every file. File the claim first. Borrowing against equity for a repair insurance might have covered is an expensive mistake.
Remember too that a claim payment is not income. It does not belong in the deposit average, and the underwriter will strip it out like any other one-time credit. Deposits tied to a contractor, such as a deposit refund, get the same treatment.
The Underwriting Sequence, Start to Finish
Income and property are independent gates. Either one can fail, and the fixes are different.
| Stage | What the underwriter checks | What can stall it |
|---|---|---|
| Income | Averaged deposits after expense factor | Short history, unsourced deposits |
| Credit and reserves | Credit profile, about 6 months reserves | Thin reserves |
| Appraisal | As-is value, condition flags | Roof drags value or triggers repairs |
| Insurance | Acceptable hazard coverage | Coverage gap, open claim paperwork |
| Final sizing | Lower of income limit and value limit | Value shortfall cuts the cash-out |
If income fails, you change the loan, the documentation, or the leverage. A different lender’s expense factor, an accountant-prepared ratio, or a smaller loan may fix it. If the property fails, you fix the roof. No documentation change gets around a roof the lender will not insure.
Open Claim, Unrepaired Damage, or Finished Repair?
How the roof reads to an underwriter depends mostly on where the repair stands.
| Scenario | How it typically reads | Likely condition |
|---|---|---|
| Claim open, no repair | Value and coverage uncertain | Adjuster paperwork, repair first |
| Claim denied | Damage stays your cost | Contractor documentation of condition |
| Claim paid, repair done | Cleanest file | Invoices and completion proof |
| Claim paid, repair pending | Funds exist but work is open | Proof of scheduled work |
| Active leak | Condition risk is high | Repair and re-inspection |
Use this rough decision order:
1. Is there an active leak today? Stop the damage now. Emergency repair cannot wait for underwriting, and keep every receipt.
2. Could insurance cover this? If so, file the claim before you borrow.
3. Is the claim settled? If not, expect the lender to want clarity on the payout and who is named on the check.
4. Is the work done? Completion evidence makes the file much cleaner than a pending repair.
5. Do you still need the equity? Refinance after the claim settles, using only the gap insurance leaves.
A seller or borrower credit alone usually does not fix a roof that blocks acceptable insurance. The lender wants the condition resolved, not offset.
How the Proceeds Get Sized
The lender sizes the loan against two ceilings, and the lower one governs. One is the income limit, set by your qualifying income and debt load. The other is the value limit, set by the appraised value and the program’s LTV cap.
A damaged roof attacks the value limit. If the appraisal comes in lower because of condition, the same LTV percentage produces a smaller loan. A borrower who needs a fixed amount for the repair can find the cash-out falls short by exactly the amount the damage took off the value.
The cash-out ceilings in the program Lendmire arranges, subject to lender guidelines, run like this:
- Primary residence: up to 80% LTV with a fixed expense ratio, and 75% if you use an accountant-prepared ratio. The accountant route is the lower ceiling, not the higher one.
- Second home: up to 75% LTV, set by loan size and credit.
- Investment property: tops out around 75% LTV.
- Asset-depletion alternative: qualifying from liquid assets runs to about 80% LTV on a primary residence. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The 90% LTV figure you may see quoted for primary residences applies to purchases and no-cash-out refinances, not to cash-out. Loan sizes run roughly $125,000 to $3,500,000, and reserves commonly sit around six months of the housing payment. Every file is underwritten individually, and these are typical ranges, not promises.
Does Occupancy Change the File?
Yes. Occupancy decides which rulebook applies to your loan. An owner-occupied file, meaning a primary residence or second home, is a consumer mortgage with full ability-to-repay review and standard consumer disclosures. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from those consumer disclosure rules. The Federal Register preamble to the ability-to-repay rule says investment-purpose credit is treated as business-purpose, and the CFPB’s TILA exam procedures say credit to acquire or improve non-owner-occupied rental property is business-purpose credit.
For rentals, most investors lean on property cash flow instead of personal deposits, which is the DSCR route. The complete DSCR loans guide covers that path. A bank statement cash-out on a rental is still possible through select programs, but it is more lender-specific.
Documents to Gather
Income
- Twelve months of business or personal bank statements
- Explanations and proof for large or unusual deposits
- An accountant-prepared expense ratio, if you want that route
Property and repair
- Photos of the damage and any inspection report
- Contractor estimates, contracts, and invoices
- Completion evidence once work is done
Insurance
- Current declarations page showing the type of roof coverage
- The claim file, adjuster report, and payout letter if a claim exists
- Details on who is named on any claim check
The full list of requirements for this exact situation is in Lendmire’s piece Bank Statement Cash-Out Refinance Requirements for a Roof or Storm Damage.
Mistakes That Stall These Files
- Borrowing before filing the claim. You can end up financing a repair insurance would have paid.
- Mixing personal and business deposits carelessly. Transfers and refunds muddy the average.
- Counting a claim payout as income. The underwriter will remove it.
- Ordering the appraisal with an open leak. A bad as-is value shrinks the loan.
- Assuming a new roof raises value. It mainly helps when the old roof was failing.
- Skipping the paper trail. Without invoices and completion proof, repair conditions linger.
What If the File Doesn’t Clear?
A stalled file usually has a fix. Start by working out which gate failed.
- Income falls short: Try a lender with a different expense factor, an accountant-prepared ratio, or an asset-depletion approach if you hold substantial liquid assets.
- Value falls short: Ask for a smaller cash-out, or repair first and reappraise.
- Insurance blocks funding: Resolve the coverage gap or finish the repair before applying again.
- Business under 12 months of deposits: Underwriters may weigh credit quality and liquid assets, but the file gets harder.
This is where a broker earns its keep. Lendmire is a mortgage broker that works with a network of wholesale lenders and matches your deposits, property, credit, and leverage need to the program that fits. The right match depends on your situation, not on a single lender’s menu. Owner-occupied bank statement loans are available where Lendmire’s consumer mortgage licensing applies, which covers 16 states.
Frequently Asked Questions
Can I refinance with roof damage that isn’t repaired yet?
Sometimes, but expect conditions. The appraiser reports the roof as-is, and the lender may require the repair and a re-inspection before funding. If the damage prevents acceptable insurance, funding usually waits until that is resolved.
Does an insurance payout count as income?
No. A claim payment is a one-time credit, and underwriters remove it from the deposit average along with transfers and refunds. It can still appear in the file as documentation for the repair.
Should I file the claim before I refinance?
Yes, in nearly every case. Filing first keeps you from borrowing against equity for damage insurance might cover. It also gives the lender clear paperwork on payout status and who is named on the check.
Will the appraiser flag my roof?
If the roof is visibly worn, leaking, or storm-damaged, the appraiser will usually note it. The notation can lower the as-is value or lead the lender to attach a repair condition.
Can I use this loan for a rental property?
It depends on the property, the program, and the lender. A non-owner-occupied rental is business-purpose, so the loan follows a different rulebook than an owner-occupied file. Many investors qualify through property cash flow instead.
If You’re Self-Employed and Ready to Look at the Numbers
If you are self-employed and want to see how the numbers work, Lendmire can help you compare bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals. Reach the team at 828-256-2183 or request a quote. Qualification is subject to lender guidelines. This is not a commitment to lend.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
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.
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References
1. CFPB – Seasoned QM Proposed Rule
2. BiggerPockets – Roof Before HELOC or Cash-Out Refi
3. NAIC – Rebuilding After a Storm: Replacement Cost vs. Actual Cash Value
4. Federal Register – Ability-to-Repay and Qualified Mortgage Standards Final Rule
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Lenders Underwrite a Bank Statement Cash-Out Refinance With a 50% Expense Ratio · Can You Get Approved for a Bank Statement Cash-Out Refinance When the Appraisal Is Low? · Does a Bank Statement Cash-Out Refinance Make Sense to Invest in the Stock Market?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.