The Quick Read: Owning 25% of an entity can support a bank statement cash-out refinance, but only your share of the business income counts toward qualifying. A lender takes the deposits, removes ineligible items, applies an expense factor, and then scales the result to your ownership percentage. The cash you can pull out is limited by the smaller of two tests: equity in the property and the income left after that haircut.
- Business statements need a minimum ownership stake. Many programs use 25% as the floor, and a few set it higher, so the exact threshold is a program-by-program question.
- Qualifying income is reduced twice: first by an expense factor, then by your ownership share.
- On an owner-occupied primary residence, cash-out typically reaches up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio.
- On a second home, cash-out typically tops out around 75% LTV. On an investment property, it is also around 75% LTV.
- Personal statements skip the ownership math but draw closer scrutiny on where the deposits came from.
Everything here is subject to lender guidelines, credit review, and property review. It is not a commitment to lend.
Most partial owners get stuck at the same point. They hear that bank statements replace tax returns and assume the whole business’s cash flow counts. It doesn’t. A quarter-owner documents a quarter of the net. That one fact drives almost every decision in this file: which statements to use, how much cash-out is realistic, and whether another path fits better.
Lendmire is a mortgage broker. It works with a network of wholesale lenders and matches the file to the program. It does not lend or approve loans. For the full picture of how investor loans fit together, see the complete DSCR loans guide.
What Is a Bank Statement Cash-Out Refinance?
A bank statement cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. Instead of tax returns, the loan is reviewed on documented income under the applicable program, subject to lender guidelines. That income comes from 12 months of bank statements, business or personal, averaged into a monthly figure.
It is not a no-document loan. The lender still has to confirm you can repay. The CFPB’s ability-to-repay compliance guide lists bank statements among the acceptable third-party records for verifying income. A bank statement program is a lender-designed way to read those records.
It also sits outside the agency box. These are non-QM loans, so they follow each lender’s program sheet rather than a single national standard. That is why terms differ file to file, and why a broker that sees many programs matters.
Key Terms Defined
Ownership floor: The minimum share of a business you must own before the lender will use that business’s bank statements as income.
Expense factor: A percentage of business deposits the lender treats as operating cost and removes before counting income.
Ownership percentage: Your share of the entity, used to scale the net income the lender counts for you.
Seasoning: The time you must have owned the property before a cash-out refinance is available, shown by the settlement statement.
Vesting: How title to the property is held, whether in your name or an entity’s name.
Cash-out LTV: The loan amount as a share of the property’s appraised value on a cash-out refinance, which is capped lower than on a purchase.
Does Owning 25% of the Entity Qualify You?
Often yes, if the program’s floor is 25% or lower. Owning exactly 25% meets a floor of 25% on most programs, but the wording matters. Some say “at least 25%.” Others say “more than 25%.” Across the wholesale network, the floor varies, and a few programs want a larger share before they will read business statements at all.
If you fall below the floor, business statements generally can’t be used, and there is no partial credit. Your options then are personal statements, a different documentation type, or, for a rental, a property-based loan.
Ask the question early. Before you gather a single statement, confirm in writing how the target program defines the floor. A file built on a program you can’t meet wastes weeks of document prep.
How Is a 25% Owner’s Income Calculated?
Qualifying income is the eligible deposits, reduced by the expense factor, multiplied by your ownership percentage, then divided by the number of statement months. The lender sets the factor. You do not pick it.
The formula, in words:
1. Total the deposits over the statement period.
2. Remove ineligible items: transfers between your own accounts, loan proceeds, gifts, and one-time deposits.
3. Apply the expense factor to the remaining business deposits.
4. Multiply what is left by 25%.
5. Divide by the number of months.
Run a hypothetical. Take identical deposits for two borrowers. One owns 100% and the other owns 25%. After the same expense factor, the 25% owner counts one quarter as much income. That is a formula example, not a real borrower’s figures. It shows why a minority owner often hits the income test before the equity test.
Expense factors vary by lender and by business type. An accountant-prepared expense ratio can replace the default factor, but it can backfire. If your real costs are higher than the default, the letter lowers your income instead of raising it. Ask your tax preparer before ordering one.
Business Statements or Personal Statements?
Business statements apply the expense factor and the ownership multiplier. Personal statements do not. This is the biggest fork for a minority owner.
| Factor | Business statements | Personal statements |
|---|---|---|
| Ownership floor | Required | Usually not applied |
| Expense factor | Applied | Not applied |
| Ownership scaling | Yes | No |
| Scrutiny | Entity documents | Deposit source |
Personal statements can produce higher qualifying income for a minority owner. The catch is scrutiny. If your share of the profit moves from the entity to your personal account as distributions or pay, the underwriter checks whether those deposits are truly business-derived. Clean, regular deposits with a clear paper trail hold up. Mixed or irregular deposits draw questions.
Many programs want deposits from one account. Some accept multiple accounts or two businesses. Confirm before you submit, not after.
How Do You Prove You Own 25%?
You prove it with documents that match each other. The right set depends on the entity type.
| Entity type | Typical proof | Common mismatch |
|---|---|---|
| Single-member LLC | Articles, operating agreement | Name differs from statements |
| Multi-member LLC | Operating agreement, K-1 | Percentage differs between papers |
| S-corp | Stock ledger, K-1 | Ledger not updated |
| Partnership | Partnership agreement, K-1 | Old agreement still on file |
Some programs let a licensed tax professional verify your ownership percentage, operating history, and expense ratio in a letter. Whatever the mix, the percentage must read the same everywhere. A K-1 at 25% and an operating agreement at 20% stops the file cold.
Self-employment history matters too. Programs generally want about two years in the same line of work. Some accept less with related prior experience. If you bought into the entity during the statement window, say so up front and document the buy-in date.
Can the Entity Own the Property?
It depends on occupancy, and occupancy decides the disclosure regime. Keep these two cases separate.
Owner-occupied property. A primary residence or second home is a consumer mortgage, so consumer disclosure rules apply. Title is usually in your personal name. This is the main lane for bank statement cash-out.
Non-owner-occupied rental. A rental, including a short-term rental, is business-purpose and exempt from TRID. The CFPB’s Regulation Z exemption treats credit to acquire, improve, or maintain a non-owner-occupied rental as business purpose. If the entity holds the rental, the entity’s operating agreement must give someone authority to borrow, and the other members may need to consent. Whether a given rule treats a loan as business-purpose is not uniform, so each program applies its own coverage test.
Bank statement files qualify the individual borrower’s income, not the property’s. If a rental sits in an entity and you only own 25%, check whether the program lets you sign personally or requires entity documents. Title changes before a refinance can trigger seasoning problems, so settle vesting before you apply.
How Much Cash Can You Pull Out?
Two tests run side by side, and the smaller one wins. The first is equity: the maximum LTV for the occupancy type. The second is income: your qualifying income after the ownership haircut must carry the new debt load.
The network’s cash-out ceilings typically run like this, subject to loan size and credit:
| Property | Typical cash-out ceiling | Note |
|---|---|---|
| Primary residence | Up to 80% LTV | Fixed expense ratio |
| Primary residence | Up to 75% LTV | Accountant-prepared ratio |
| Second home | Up to 75% LTV | Never the purchase ceiling |
| Investment property | Around 75% LTV | Tighter than owner-occupied |
For comparison, purchase and rate-and-term files on a primary residence can reach up to 90% LTV through select lenders. Do not apply that figure to a cash-out. Loan amounts typically run from roughly $125,000 to $3,500,000, and reserves commonly run around six months of the housing payment.
For a 25% owner, income usually binds first. The ownership haircut shrinks qualifying income, and debt-to-income on the new payment is tested against that smaller number. You may have plenty of equity and still be capped by income. That is the “penalized twice” feeling many partial owners describe: once by the expense factor and again by the ownership share.
What Do You Gather Before Applying?
Gather these before the file goes in. Missing pages are the most common preventable gap.
- Ownership: operating agreement or partnership agreement, K-1, articles of organization, and any tax-professional letter.
- Statements: 12 months of full statements, every page, from the account you plan to use.
- Property: current mortgage statement, insurance declarations page, and the settlement statement showing when you acquired it.
- Explanations: short letters for large one-time deposits, transfers, and any ownership change.
- Identity and credit: government ID and authorization for a credit pull.
Before you send statements, mark every transfer between your own accounts and every loan or gift deposit. The underwriter will strip them anyway. Showing you already know which deposits are real income builds file credibility.
How Do You Apply, Step by Step?
1. Confirm the program floor. Ask whether the ownership requirement is “at least” 25% or “more than” 25%, and whether it applies to business statements only.
2. Choose the statement route. Decide between business and personal statements based on where your income lands and how clean the trail is.
3. Check the expense approach. Ask whether the program uses a fixed factor, a business-type schedule, or an accountant-prepared ratio, and whether a letter would help or hurt.
4. Settle vesting and seasoning. Confirm how title is held and that you meet the minimum ownership period for cash-out.
5. Assemble the package. Pull the ownership proof, statements, property documents, and explanation letters.
6. Submit for review. The broker matches the scenario to the wholesale lenders whose guidelines fit your ownership, occupancy, and leverage.
7. Order the appraisal. Value sets the equity test. An owner-occupied single-family home typically uses a 1004 form, and 2-4 units use a 1025.
8. Clear conditions. Respond to underwriting requests for missing pages, letters, or title items, then reconcile the settlement statement at closing.
Lendmire’s job at step 6 is the match. Lenders in the wholesale network differ on ownership floors, expense factors, and single-account rules, so the same file can be a clean fit in one program and a poor fit in another.
What Stalls a Partial-Owner File?
These show up repeatedly:
- Ownership percentages that disagree across the operating agreement, K-1, and tax-professional letter.
- Statements with missing pages or unexplained large deposits.
- Deposits spread across several accounts when the program wants one.
- A letter that raises the expense ratio above the default.
- Title or vesting changes made just before applying.
- Assuming the 90% purchase leverage applies to a cash-out.
Most of these are documentation problems, not credit problems. Fixing them before submission costs far less than fixing them after underwriting asks.
When Does a Different Path Fit Better?
If the property is a rental, a property-based loan can sidestep the ownership math entirely. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines, so the entity’s income and your share of it do not drive the number. A 25% owner whose haircut shrinks income may find a rental cash-out works better on that side. Rental cash-out generally tops out around 75% LTV on standard rentals, and some programs go lower on short-term rentals.
| Factor | Bank statement | DSCR |
|---|---|---|
| Income basis | Your deposits | Property rent |
| Ownership share | Scales income | Not used |
| Best fit | Owner-occupied homes | Rentals |
| Main limit | Income after haircut | Rent vs. payment |
For your own home, bank statements remain the main tool. Lendmire’s piece Can You Get Approved for a Bank Statement Cash-Out Refinance Owning 25% of the Entity? goes deeper on the threshold question. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
The best program depends on your situation: occupancy, ownership share, credit profile, leverage need, and documentation. A broker that shops several wholesale lenders can compare the routes on your actual deposits.
Consumer mortgage licensing for this lane covers 16 states, so availability depends on where the property sits.
This article is general information, not legal or tax advice. Consult a qualified attorney or CPA about your own situation, as tax treatment varies.
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.
Frequently Asked Questions
Does owning exactly 25% meet the ownership floor?
On programs that say “at least 25%,” yes. On programs that say “more than 25%,” no. Floors also vary by lender, and some set a higher share. Confirm the wording before building the file.
Can I skip the ownership math with personal statements?
Personal statements generally don’t apply the ownership multiplier or an expense factor. The tradeoff is scrutiny: the underwriter will test whether the deposits trace to real business income. Irregular or mixed deposits weaken that route.
Does a tax-professional letter always help?
No. It can verify ownership and operating history, and it can replace the default expense factor. But if your real costs run higher than the default, the letter lowers your qualifying income. Ask your preparer what number it would show before you order it.
Can I combine my partners’ statements with mine?
Generally not. Qualifying income follows the borrower’s own ownership share, and many programs want deposits from a single account. A few programs accept more than one account or two businesses, so ask during program matching.
How much cash-out can I expect?
It depends on the smaller of the equity and income tests. Up to 80% LTV on a primary residence with a fixed expense ratio is typical, 75% with an accountant-prepared ratio, and around 75% on second homes and investment properties. For a 25% owner, income usually limits the amount before equity does.
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 brokerage serving self-employed and high-net-worth borrowers in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB Ability-to-Repay and Qualified Mortgage Small Entity Compliance Guide
2. CFPB Regulation Z §1026.3, Exempt transactions
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: 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? · How Lenders Underwrite a Bank Statement Cash-Out Refinance With a 50% Expense Ratio
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.