How Bank Statement Loan Down Payment Rules Work for a Sole Proprietor

The Quick Read: Your down payment is whatever the lender’s maximum loan-to-value (LTV) cap leaves over, and that cap shifts with occupancy, credit, loan size, reserves, and whether you are buying or pulling cash out of a property you already own. For a sole proprietor on a primary-residence purchase, select lenders in Lendmire’s wholesale network typically go up to 90% LTV, which means roughly 10% down on the strongest files. The sections below show how that number is set and what counts as down payment money.

• Primary-residence purchase or rate-term refinance: up to 90% LTV on the strongest files, typically.
• Owner-occupied cash-out (primary or second home): up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio.
• Investment-property cash-out: tops out around 75% LTV. Investment purchase leverage varies by lender.
• Documentation is typically 12 months of personal or business bank statements. Reserves are commonly about 6 months of the housing payment.

What Is a Bank Statement Loan, and Why Does a Sole Proprietor Use One?

A bank statement loan is reviewed around documented income under the applicable program, subject to lender guidelines. The lender averages the deposits in your accounts instead of leaning on a tax return. It is built for self-employed borrowers whose returns show less income than they actually earn, because write-offs shrink the taxable number.

A sole proprietor is the simplest version of that borrower. There is no separate legal entity. You and the business are the same person, so your personal account often holds business income. That is why down payment questions get tangled here: the money that proves your income and the money you plan to put down can sit in the same account.

Loan amounts across the network run roughly $125,000 to $3,500,000. Programs differ by lender, and every file is underwritten individually. Lendmire is a broker. It arranges these loans through select lenders and does not make the credit decision.

How Is the Down Payment Actually Set?

The down payment equals the purchase price minus the maximum loan the program allows. Nobody sets it by statute. The lender’s LTV grid sets it, and the grid reads several inputs at once.

Across the wholesale network, the pattern is consistent. The stronger the file on every row, the closer you get to the top of the range. A weak row rarely sinks a file alone, but it usually costs you leverage. Think of it as trading: more cash down buys back room on credit or reserves.

What Are the Leverage Ranges by Loan Type?

Here are the typical ranges, each tied to its occupancy and transaction. They are guidelines from select lenders, not commitments.

• Primary residence, purchase or rate-term refinance: up to 90% LTV. Only stronger files reach the top of that range.
• Primary residence, asset-depletion alternative: up to about 80% LTV. The borrower’s income is qualified against liquid assets instead of deposit averages.
• Owner-occupied cash-out (primary or second home): up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. The exact cap depends on loan size and credit. This is a cash-out ceiling, not a purchase ceiling.
• Investment-property cash-out: tops out around 75% LTV.
• Investment-property purchase on bank statements: varies by lender, so treat any single number with suspicion. Investors buying a pure rental often get better-fitted terms on the DSCR side. DSCR stands for debt service coverage ratio, a test that divides the property’s rent by its monthly obligation. Lendmire’s complete DSCR loans guide walks through that lane.

Notice the gap between the 90% purchase figure and the 75% to 80% cash-out figures. People quote the high number without the label. Always ask which transaction it belongs to. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

What Counts as Down Payment Money for a Sole Proprietor?

Down payment funds must be yours, traceable, and sitting in an account the lender can document. For a sole proprietor, that usually means personal savings, business-account funds you can show are your own, sale proceeds from another property, or gift funds where the program allows them.

Moving money between your own accounts does not turn it into new income, and it does not make the source clearer. A transfer from business to personal checking is still your money. But it also leaves a trail the underwriter has to follow, so keep the paper trail clean from the start.

Lender rules on how long funds must sit before you use them differ by program. Plan on having the money in place well before you apply.

Why Are a Sole Proprietor’s Accounts a Special Case?

Because the owner and the business are legally the same, one account can hold both. That is not a problem by itself. It becomes one when the deposits blur.

The underwriter has to split your deposits into three buckets. The first is true income, meaning customer payments and revenue that fit your type of business. The second is your own money moving around: transfers between accounts, loan proceeds, refunds, and one-time items. The third is down payment funds you are accumulating. Only the first bucket counts toward qualifying income.

Here is the trap. A large lump of cash you saved for the down payment can look like unexplained income if it arrives all at once. A round-number deposit gets questioned. If the lender cannot tie a deposit to your business, it may drop it from the income calculation and ask where it came from for the asset side.

Personal statements are often the simpler path for a sole proprietor, because most programs count them closer to face value. Business statements usually take an expense factor, which is the lender’s estimate of what share of deposits goes to operating costs. Lenders set that factor, not you. A CPA letter or profit-and-loss statement can sometimes support a lower one, but the program decides. Factors vary by lender and business type, so treat any single published percentage as a guess.

How Do Down Payment, Reserves, and Income Interact?

They compete for the same cash. This is the part most borrowers miss.

Say you have enough saved to hit a 10% down payment on a primary residence. You send it to closing and your account balance falls. Reserves, commonly about 6 months of the housing payment, are layered on top. If the down payment drains the account below that line, the file stalls even though the LTV worked.

So the planning question is not just “what is the minimum down payment.” It is “what will be left after the down payment, and does it meet the reserve requirement?” Sometimes the smarter move is a slightly larger down payment on a stronger-credit file, or a slightly smaller one that keeps reserves intact. Either way, check both numbers together. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

A related point on income: deposits that fund the down payment leave the account before closing, so they do not inflate your qualifying income. They simply prove you had the cash.

Worked Example: A Sole Proprietor Buying a Primary Residence

Consider a hypothetical consultant, a one-person service business, buying a primary residence. These are modeled assumptions, not market data.

The consultant provides 12 months of personal statements. The lender strips out transfers between the consultant’s own accounts and a one-time loan deposit. It averages the remaining customer payments and tests that qualifying income against the proposed housing payment. Credit is strong and reserves clear the roughly 6-month line.

On those facts, a lender in the network could offer up to 90% LTV, so about 10% down. Now change one input. Drop the credit profile or add a larger loan size, and the cap may slip toward 85% or 80%, which moves the down payment to 15% or 20%. Same borrower, same income, different number. The grid did that, not a rule. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.

If that same consultant wanted to pull cash out of the home later instead, the ceiling would be 80% with a fixed expense ratio, or 75% with an accountant-prepared ratio. Lendmire’s piece How Much a Sole Proprietor Can Pull in a Bank Statement Cash-Out covers that side.

Where Does the General Rule Break?

Four edge cases move the down payment more than anything else.

Investment property. A rental purchase almost always needs more equity than a primary home. Leverage on bank statement documentation for investment purchases varies by lender. If the property is a pure rental, a DSCR loan may fit better because it qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal deposits matter less there.

Owner-occupied multi-unit. If you live in one unit, it is a consumer mortgage, and the DSCR route is off the table. The bank statement lane applies.

Short self-employment history. Many programs want about two years of self-employment. Some make exceptions with compensating factors like a larger down payment, a higher credit score, or prior industry experience. Do not count on an exception without asking the lender first.

Second homes. Occupancy matters here too. Lendmire’s article How to Source a Down Payment on a Second-Home Bank Statement Loan goes deeper on the funds trail.

One more distinction matters for the paperwork you receive. An owner-occupied file is a consumer mortgage, so the full consumer disclosure regime applies. 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. Know which one your property falls into before you compare offers.

Is There a Federal Minimum Down Payment?

No. Nothing in federal rules sets a down payment for these loans. The rule that governs the topic is about repayment ability, not equity.

The CFPB’s Ability-to-Repay and Qualified Mortgage compliance guide says a lender must verify the information it relies on, using reasonably reliable third-party records. It treats deposits into your account as your income only when the lender relies on them. That is why statements get scrubbed.

A law-firm compliance review explains that a lender making a loan outside the qualified mortgage safe harbor must still consider factors such as income or assets, and verify what it uses. So “non-QM” does not mean “no verification.” It means the loan sits outside that safe harbor, and the lender builds its own underwriting. Down payment is not one of those tests. The lender’s own LTV grid fills that gap.

What Mistakes Hurt a Sole Proprietor’s Down Payment File?

Most problems are self-inflicted and avoidable.

• Commingling. Dumping personal funds into the business account, or vice versa, right before applying. It muddies both the income count and the asset trail.
• Large unexplained deposits. A round-number deposit with no paper trail invites questions and delays.
• Draining reserves. Hitting the down payment target but dropping below the reserve line.
• Moving money late. Shifting funds between accounts just before applying, which can reset the clock on sourcing.
• Assuming business expenses will not matter. If the business has real operating costs, business statements take a real haircut. Personal and business statements can give very different results.

How Should You Prepare Your File?

Start with the accounts. Pick the statement set that best reflects your income, personal or business, and keep that account clean. Sort your deposits so you can explain each one. Gather proof of where the down payment is coming from: statements, a settlement statement if you sold a property, or a gift letter if applicable.

Next, check reserves against the down payment. Then ask a broker to compare programs against your credit profile, loan size, and property. Because lenders differ on expense factors, statement periods, and overlays, comparing several programs is usually worth it.

Finally, remember that tax treatment varies and a qualified professional should advise you on it.

Key Terms Defined

LTV (loan-to-value): the loan amount divided by the property’s value. A 90% LTV means the lender funds 90% and you cover the rest. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Expense factor: the percentage of business-account deposits a lender subtracts for operating costs before counting the rest as income.

Reserves: liquid cash you hold after closing, commonly expressed as months of the housing payment.

Asset depletion: an alternative documentation method that is reviewed against liquid assets instead of deposit averages.

Seasoning (of funds): the time money has sat in your account before you use it, which helps show it is genuinely yours.

Non-QM: a loan that falls outside the qualified mortgage safe harbor and follows the lender’s own underwriting.

Next Step

Consumer mortgage licensing for owner-occupied files covers 16 states, and qualification is subject to lender guidelines and credit approval, not a commitment to lend.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB ATR/QM Small Entity Compliance Guide

2. CFS Review: CFPB Addresses Non-QMs Under Ability-to-Repay Rule