The Quick Read: A loss on your tax return does not end the search, because neither option uses the return as its income measure. A bank statement loan estimates your income from deposits. An asset-based mortgage is reviewed around the balances in your accounts. Which one fits depends on whether your cash flow or your savings tells the stronger story.
- Bank statement loans read 12 or 24 months of deposits and turn them into monthly income.
- Asset-based mortgages use eligible account balances, either to cover the loan outright or to create qualifying income.
- The asset-based mortgage asks for no traditional personal-income documentation, pay stubs or employment verification, and the bank statement program typically does not require returns either, but both are fully underwritten.
- Cash-out has a published ceiling only on the asset depletion path, at up to 60% loan-to-value, subject to underwriting; the lender sets cash-out terms on the asset qualifier path.
- Privately held company stock is not an eligible asset on either asset-based path.
In short, the bank statement route suits an owner whose business moves a lot of money through its accounts but whose returns are shrunk by write-offs, depreciation or a rough year. The asset-based route suits someone whose balance sheet is large and whose documented income is small or messy: a business seller, a retiree, a household living on a portfolio. Some borrowers could use either. A few fit neither. That is the point of comparing them.
What Does “Asset-Based” Mean Here?
The term is slippery, so here is the meaning used here. An asset-based mortgage is a consumer loan that is reviewed against eligible assets instead of your income. It has two paths, and a borrower is qualified on one path at a time.
The asset qualifier path requires eligible assets, after the credit percentages below, to equal or exceed the entire loan amount. No employment or income is documented. The asset depletion path divides usable assets by 60 months to create a monthly qualifying income. That income then has to carry the housing payment and your other debts through the debt-to-income test.
You may also hear “asset-based” used for rental financing, where the property’s rent is the qualifying factor. That is a different product, a DSCR loan, and it is built for business-purpose rental properties. This article stays with the account-balance meaning. You can read how the lenders we place files with structure these loans on the asset-based mortgage program page.
Side-by-Side
The bank statement column reflects published industry norms. The asset-based column reflects the programs we place through select lenders, subject to underwriting.
| Factor | Asset-Based Mortgage | Bank Statement Loan |
|---|---|---|
| What gets measured | Account balances | Deposits over 12 or 24 months |
| How income is built | None (qualifier) or balances ÷ 60 (depletion) | Eligible deposits averaged monthly |
| Tax returns needed | No | No, in most programs |
| Documentation | Account statements | Business or personal statements |
| Effect of a loss return | Not an input | Not a direct input |
| Other debts in DTI | Depletion path only | Yes |
| Cash-out | Depletion path: 60% LTV | Varies by program |
| Property types | Home, second home; investment on depletion | Often owner-occupied; varies |
| Reserves | Qualifier: none at or below 75% LTV | Commonly required; varies |
| Main risk | Assets short or unseasoned | Weak or declining deposits |
Why a Loss on Your Return Is Not the Whole Story
A tax return measures taxable income, not cash. Depreciation, cost segregation and large write-offs push taxable income down while money still flows through your accounts. A return can show a loss in a year when the business deposited plenty. That is why a document-light alternative exists at all.
Neither option here treats the return as the income test. One caution: an underwriter on a bank statement file may still notice a loss, and may ask you to explain the gap between deposits and the return. Have that explanation ready. Tax treatment varies; consult a qualified professional.
How a Bank Statement Cash-Out Works
Industry practice is straightforward. You supply 12 or 24 consecutive months of statements. The underwriter totals the eligible deposits and strips out transfers between your own accounts, loan proceeds, owner capital infusions and refunds. On business accounts, an expense factor is applied, because not every deposit is profit. The result is averaged into monthly income and tested against a debt-to-income limit.
Two things follow. First, your personal debts count. Second, deposits that look strong in a single month can still disappoint when averaged. The property is still appraised and your credit is still reviewed.
How an Asset-Based Cash-Out Works
Cash-out on the asset-based side runs through the asset depletion path. On a principal residence or second home, loan-to-value tops out at 60% on a cash-out refinance. On an investment property, the cash-out ceiling is also 60%, and the loan is business-purpose. Loan amounts on that path run from $125,000 to $3,500,000, subject to underwriting. Cash-out proceeds never count as qualifying assets.
The asset qualifier path, by contrast, allows up to 75% on a refinance of a principal residence or second home. Whether cash-out proceeds are allowed on that path is set by the lender, so do not plan around it.
Here is how the depletion math runs. Say you hold $1,500,000 in securities, which count at 80% for $1,200,000, plus $300,000 in cash, which counts at 100%. That is $1,500,000 of usable assets. Divided by 60 months, it produces $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test. This is illustrative; the lender’s own calculation governs.
On the depletion path, the share of each balance that counts is:
- Cash accounts and certificates of deposit: 100%
- Securities: 80%
- Retirement accounts: 70% at any age
- Real-estate equity: 60%
On the qualifier path, brokerage accounts, certificates of deposit, money market and savings count at 100%. Retirement accounts there count at 90% under age 59½ and 100% at 59½ or older, which differs from the 70% on the depletion path, so the two tables are never blended.
Cryptocurrency, precious metals and collectibles are not published as eligible on either path. If your wealth sits in those, the documented route is converting it to a seasoned cash balance in a regulated account, with the source reviewed by the lender. Sale-of-business proceeds are excused from the depletion path’s seasoning rule.
Credit matters too. The qualifier path publishes a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor there needs 700. Seasoning rules apply: the qualifier path wants 60 days and two months of statements per account. The depletion path wants statements at least 120 days old plus a recent one within 45 days. The depletion path also sets a minimum for qualified assets: the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when assets are the only income source.
When Asset-Based Is the Better Fit
Choose the asset-based route when your balance sheet is stronger than your income story. Three borrower pictures fit:
- The business seller. You sold a company and the proceeds are sitting in cash. Your returns show a loss or little income. Seasoned sale proceeds count at their full percentage, and the depletion path excuses them from the seasoning rule.
- The portfolio household. You live on a brokerage account and retirement distributions. A bank statement review would see irregular deposits, but the balances are large.
- The founder with private stock. Privately held company stock is not an eligible asset on either path. The route is documented liquid assets, such as cash, public securities and retirement accounts at their counting percentages. A buyout or sale converted to cash qualifies as the seasoned balance.
Asset-based also suits borrowers who want their other debts kept out of the equation. On the qualifier path there is no income documented at all. That is not the same as no documentation. The assets are verified with statements, and the file is fully underwritten.
The tradeoff is leverage on a cash-out. The asset depletion path, which handles cash-out, tops out at 60% loan-to-value, and its minimum-assets rule is real. The qualifier path’s 75% applies to a refinance, and its cash-out treatment is set by the lender. If your assets cannot clear the depletion minimum, this route does not work for a cash-out.
When Bank Statement Is the Better Fit
Bank statement fits when cash flow is strong and savings are modest. The classic case is a working owner who reinvests heavily. The business deposits steadily, the accounts are active, and the return looks poor because of write-offs.
It also suits a borrower who needs more leverage than 60%, since leverage on that product is set by its own program guidelines rather than by the asset-based figures above. Lendmire’s wholesale network places both kinds of loan.
1. Deposits come from one or two accounts, not a dozen.
2. The business has been open long enough for the review period.
3. Deposits are steady or rising, not dropping.
4. Your other monthly debts are modest, since they count in the debt-to-income test.
If your business is younger than 24 months, a 12-month review may work where a 24-month one cannot. A CPA or tax-preparer letter can sometimes support a different expense factor, though programs differ.
Where Both Options Stumble
Each path fails differently. Bank statement files struggle with lumpy or falling deposits, large personal debts and heavy transfers between accounts. Asset-based files struggle with balances that are thin, unseasoned or held in ineligible forms. Neither path forgives a weak credit profile or a property that does not appraise.
Self-test before you apply. Add up your usable assets using the percentages above, and compare the total to the loan you want. Then pull your last 12 months of deposits and subtract transfers and one-time inflows. Whichever number looks stronger points you toward the matching route. If both are weak, a different structure may fit better, such as a smaller loan.
A Note on Business Purpose
Rental-property cash-out is treated differently from a standard owner-occupied mortgage. Under the CFPB’s commentary on business-purpose credit, credit to buy, improve or maintain a non-owner-occupied rental is deemed business purpose, while small owner-occupied rentals are handled differently. Supervisory guidance also says a business-purpose determination should rest on supporting documentation, not a checked box alone. In practice, keep clear records of what the cash-out will be used for. Eligibility remains subject to lender guidelines.
Key Terms Defined
Asset qualifier path: A way to qualify on assets alone, where eligible assets must equal or exceed the whole loan and no income is documented.
Asset depletion path: A way to turn usable assets, divided by 60 months, into monthly qualifying income that goes through the debt-to-income test.
Expense factor: The share of business-account deposits an underwriter subtracts because not all deposits are profit.
Seasoning: How long funds have sat in your account, so the lender knows they are yours.
Debt-to-income (DTI): Your monthly debts divided by your monthly income.
Frequently Asked Questions
Do I need tax returns for either loan?
Neither the asset-based mortgage nor a typical bank statement loan relies on tax returns, pay stubs or employment verification. Both are still fully underwritten, with credit, the property and the appraisal reviewed. Programs vary, so confirm what a specific lender wants before you apply.
Can I use cash-out proceeds to meet the asset requirement?
No. On the asset depletion path, cash-out proceeds never count as qualifying assets. The assets must exist and be documented before the loan. That rule also keeps the math honest, because the money you borrow cannot be the money that qualifies you.
What if my money is in my own company’s stock?
Privately held company stock is not an eligible asset on either path. The route is documented liquid assets, such as seasoned proceeds from a sale or conversion, cash, public securities and retirement accounts at their counting percentages. Sale-of-business funds are excused from the depletion path’s seasoning rule.
Can I do a cash-out on an investment property with asset-based qualifying?
Yes, on the asset depletion path, subject to underwriting. Investment property is limited to 60% loan-to-value on a cash-out, and the loan is business-purpose. The qualifier path does not publish a cash-out figure, so do not plan around it.
Which is better if my deposits and my assets are both strong?
It depends on your goal. If you want the largest loan amount, compare the leverage each program allows. If you want your personal debts out of the picture, the qualifier path is the cleaner test. A broker who shops several wholesale lenders can run both against your statements.
The Verdict
Pick bank statement when your cash flow is the strong story and your savings are modest. Pick asset-based when your savings are the strong story and your cash flow is thin or irregular. If a loss on your return is what scared you, take comfort: it matters less than the deposits or balances you can document. If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals. Consumer lending for this program is licensed in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Lendmire is a mortgage broker, not a lender, and approval is never guaranteed.
For how equity extraction works on an investment property, see 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
2. Federal Reserve Board Reg Z supervisory manual
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Asset-Based Cash-Out Refinance Options After Buying a Property With Cash · Asset-Based Cash-Out Refinance Requirements When Your Tax Returns Show a Loss · Asset-Based Cash-Out Refinance vs Bank Statement Cash-Out Refinance at 75% Loan-to-Value
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.