The Quick Read: It depends on your deposits, not on any K-1 cap. No K-1-specific borrowing limit exists, so the lender builds monthly income from your eligible deposits, trims it by an expense ratio when the money flows through a business account, and tests the result against debt-to-income, credit, reserves, and the program’s loan-size and leverage limits. The K-1 stops being your income measure. It becomes proof that you own your share of the business.
- Deposits set income. Distributions that reach your accounts count. Allocated paper income on the K-1 does not.
- Ownership share is the swing factor. Business statements generally need at least 25% ownership, and many programs scale income to your share.
- The tightest limit wins. Income, leverage, reserves, and program size each cap the loan. The lowest one sets your number.
- Size runs from $300,000 to $30,000,000 through select wholesale programs, subject to full underwriting. Everything above $4,000,000 is reviewed case by case.
- Rentals usually belong on a different loan. K-1 income does not strengthen a property’s rent-to-payment ratio.
Why a K-1 Understates What a Partner Earns
Your share of the partnership’s income, not the cash you received. Those two figures can sit far apart.
The IRS instructions for Schedule K-1 describe the form as reporting your share of the partnership’s income, deductions, and credits. Distributions are reported separately in box 19. So a partner can be allocated a large income share, owe tax on it, and still take home much less in cash.
Now flip it. Depreciation, write-offs, and retained earnings can push the K-1 income number low while real cash flows to you every month. Same partner, opposite problem.
Either way, the K-1 line items are a poor yardstick for cash. A bank statement lender reads the cash itself. That is why partners with large write-offs and steady distributions are the classic candidates for this loan.
How a Bank Statement Lender Turns Deposits Into Income
The lender averages your eligible deposits over the statement window, removes anything that is not income, applies an expense ratio if the account is a business account, and tests what is left. Here is the sequence.
1. Pick the account route. Personal-account deposits are read close to their raw average. Business-account deposits get an expense ratio, and your ownership percentage matters.
2. Choose the window. Programs read 12 or 24 months of statements, as Scotsman Guide lays out for self-employed borrowers. The bank portfolio program in Lendmire’s network reads 12.
3. Clean the deposits. Capital contributions, transfers between your own accounts, refunds, and loan proceeds come out. One-off lumps usually come out too.
4. Apply the expense ratio. Across the wholesale network, the fixed ratios are 20% for a service business with no employees, 40% for one to five employees, and 50% for six or more employees or any product business. An accountant-provided ratio or a profit-and-loss method (capped at 80%) can replace them.
5. Apply ownership share. Item J on your K-1 documents your percentage. How a program uses it varies, so confirm it against the specific program.
6. Run the rest of the file. Credit, debts, reserves, property type, and leverage are all still reviewed. Non-QM does not mean no underwriting; the lender must still confirm repayment ability.
One point surprises people. Transfers from your own business into your personal account count at 100% on programs in the network. For many partners, that is exactly how distributions arrive. For a walkthrough of how those deposits get read, see Lendmire’s guide on using K-1 income on a bank statement loan.
How Much Can a K-1 Partner Borrow on Bank Statements?
Your maximum loan is the lowest of four ceilings: what your income supports, what the property’s value and leverage allow, what your reserves cover, and what the program itself carries. It is never a multiple of your K-1 income.
Start with the income chain. Take the eligible deposits, average them, apply the expense ratio, then (where the program scales for it) apply your ownership share. That gives monthly qualifying income. The lender then checks that income against the proposed housing cost plus your other debts, with debt-to-income typically allowed up to 50% on programs in the network, subject to underwriting.
Here is how ownership changes the picture. The figures below are an index, not dollars. Say a business account averages 100 units of eligible deposits a month, and the 50% expense ratio applies.
| Partner | Ownership | Business-statement route | Counted income |
|---|---|---|---|
| Majority | 60% | Eligible | 30 units |
| Minority | 30% | Eligible | 15 units |
| Small minority | 15% | Below the 25% floor | Business route closed |
The majority partner counts twice the income of the 30% partner on identical deposits. The 15% partner cannot use business statements at all. That partner’s route is the personal account, if distributions land there and the file is clean.
The four ceilings
| Ceiling | What it limits | Typical network parameter |
|---|---|---|
| Income and DTI | Housing cost you can carry | DTI up to 50% |
| Equity and LTV | Loan as a share of value | Steps down as size rises |
| Reserves | Cash left after closing | 3, 6, or 9 months by size |
| Program size | Largest loan carried | $6,000,000 or $30,000,000 |
Reserves run 3 months up to a $500,000 loan, 6 months up to $1,500,000, and 9 months above, through select wholesale programs. Each additional financed property adds 2 months, to a 12-month maximum. First-time investors typically need 12.
Two programs, two size ranges
Lendmire arranges these loans through two wholesale programs. The first, a portfolio non-QM bank statement program, carries loans to $6,000,000. The second, a bank portfolio jumbo program, takes twelve-month-statement files up to $30,000,000 on its own ladder. That ladder runs 65% to $5,000,000, 60% to $10,000,000, and 55% to $30,000,000. It begins above $4,000,000 and overlaps the portfolio program to $6,000,000. Every loan above $4,000,000 is reviewed case by case before submission.
Leverage steps down as the loan grows
These are ceilings at stronger credit tiers on a purchase, through select wholesale programs, subject to full underwriting.
| Loan size | Primary residence | Investment property |
|---|---|---|
| $300K to $1M | 90% | 85% |
| $1M to $1.5M | 85% | 80% |
| $2M to $2.5M | 80% | 80% |
| $3M to $3.5M | 75% | 60% |
| $4M to $5M | 65%, on review | 65%, on review |
| $10M to $20M | 55%, on review | 50%, on review |
Second homes run close to the investment column. Cash-out is more limited. On the portfolio program, cash-out above 60% LTV is capped at $1,500,000 in hand.
The binding constraint changes with the borrower. A partner with strong deposits buying a $4,500,000 home is usually limited by leverage and the case-by-case review, not income. A partner with thin documented deposits buying a $600,000 home is limited by income long before leverage matters. Know which one is yours before you shop.
Which Deposits Count, and Which Do Not
Only money that is genuinely yours and recurring counts. Distributions paid to you count. Anything that just moves money around does not.
| Deposit type | Counts as income? |
|---|---|
| Partner distributions | Yes |
| Business-to-personal transfers (your own business) | Yes, in full |
| Capital contributions you put in | No |
| Transfers between your own accounts | No |
| Loan proceeds and refunds | No |
| One-time lumps | Usually removed |
Statements must be consecutive. A transaction history printout never substitutes for them.
Partners who move money in and out of the business around statement time often shrink their own qualifying income, because each round trip gets stripped out. Clean, regular distributions beat large irregular ones.
Personal Statements or Business Statements?
Personal statements are simpler. Business statements can show a bigger number, but they trigger the expense ratio and the ownership test.
Business statements need at least 25% ownership on programs in the network. Above that line, you pick the account that tells the stronger, cleaner story. Below it, the personal route is what remains.
Commingled accounts add friction. Underwriters separate business revenue from personal deposits, and the expense ratio applies only to the business portion. Expect extra document requests if your accounts mix.
Hold interests in several partnerships? Each entity’s deposits get read on their own terms, and each ownership share gets documented. The net result can still be strong, but the file grows heavier. (Underwriters read every page, so organized beats thorough.)
What If Your K-1 Shows a Loss or No Distributions?
A paper loss on the K-1 does not by itself block a bank statement loan, because the lender is reading deposits, not the K-1 income line. Zero distributions is the real problem, since there is nothing to average.
When deposits are thin, two asset paths exist through select wholesale programs. Both apply to primary and second homes only.
- Asset allowance divides your liquid assets by 36 months (supplemental, with DTI at or below 60% before the asset income), 60 months (supplemental, with DTI above 60% before the asset income), or 84 months (standalone, or any loan above $3,500,000). It tops out at 80% LTV, and the file with the asset income counted must still fit the 50% DTI ceiling.
- Assets-only qualifies with no DTI test when your U.S. liquid assets equal the loan amount plus closing costs plus sixty months of any net loss on other residential property. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Retirement accounts count at 70%, or 80% if you are 59½ or older. Business funds, gifts, unvested stock, and cryptocurrency never count. Trusts other than a revocable living trust do not count either.
Distributions larger than your K-1 income raise a different question. The deposits show real cash, but an underwriter may ask whether that pace is sustainable. A business younger than 24 months invites the same conversation. Liquid assets and credit quality can help carry a shorter history.
Documents to Gather
Expect the file to be organized around three proofs: you own it, the cash arrives, and the entity is real.
- Consecutive statements for the chosen window (12 or 24 months), every page.
- Your K-1s, as ownership proof.
- The operating or partnership agreement showing your percentage.
- Entity records, with your name, the business name, and the EIN matching across every document.
- A profit-and-loss statement or accountant letter if you want a different expense ratio.
- Asset statements for reserves.
A name or ownership mismatch between documents is the easiest way to stall a file. Fix it before you submit. Lendmire’s complete guide to bank statement loans for K-1 partners goes deeper on the paper trail.
Bank Statement Underwriting Versus K-1 Underwriting
The two methods read different evidence. The table shows where they split.
| Factor | Bank statement path | K-1 (tax-return) path |
|---|---|---|
| What counts as income | Eligible deposits | K-1 ordinary income |
| Role of the K-1 | Ownership proof | Income proof |
| Proof of cash | Statements themselves | Distributions or liquidity test |
| Write-offs | Largely ignored | Reduce counted income |
For contrast, the Fannie Mae Selling Guide counts K-1 income for owners below 25% only when it was actually distributed or the business has adequate liquidity. The bank statement path does not run that test; it reads cash received. It has its own limits, which is why the next section matters.
When Another Loan Fits Better
If you are buying a rental, a different loan usually fits better. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
Here is the catch with using bank statement loans for rentals. Each new bank statement mortgage adds to the same debt-to-income ratio, so your ceiling arrives after a few properties. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, so each property stands alone. K-1 income does not lift a weak coverage ratio. Some select lenders in the network will review sub-1.00 coverage, but leverage and terms adjust when they do. K-1 distributions can, however, serve as evidence of reserve funds.
A common sequence for self-employed K-1 partners is a bank statement loan on the home you live in, then DSCR loans on the rentals. Lendmire’s complete DSCR loans guide explains how that second half works.
Why Partner Files Get Reduced or Turned Down
Most downsized files trace back to a handful of causes. Each one is avoidable.
- Unexplained large deposits. Anything the lender cannot source gets removed, and your income shrinks.
- Ownership mismatches across the K-1, the agreement, and the entity records.
- Declining deposit trends. A strong early window followed by a weak recent one worries underwriters.
- A tight expense ratio choice. A 50% default leaves less income than an accountant-supported lower ratio.
- Heavy existing debt. Debts count against the 50% DTI ceiling no matter how good the deposits look.
- Credit below the floor for the loan size.
Programs change, and every file is underwritten individually. Tax treatment varies; consult a qualified professional before relying on any deduction.
Key Terms Defined
K-1: The tax form that reports your share of a partnership’s or S-corporation’s income, losses, and distributions.
Distribution: Cash the business actually pays out to you, as opposed to income allocated to you on paper.
Expense ratio: The percentage of business-account deposits treated as operating costs before income is counted.
DTI (debt-to-income): Your monthly debts, including the new housing cost, divided by monthly qualifying income.
LTV (loan-to-value): The loan amount as a percentage of the property’s value.
Reserves: Liquid cash you hold after closing, counted in months of the monthly obligation.
Non-QM: A loan outside the standard Qualified Mortgage definition. It describes the loan category, not a weak borrower.
Frequently Asked Questions
Is there a maximum loan amount for K-1 partners?
Not a K-1-specific one. Loans run from $300,000 to $30,000,000 through select wholesale programs, with the portfolio program reaching $6,000,000 and the bank program carrying twelve-month-statement files to $30,000,000. Your own ceiling comes from income, leverage, reserves, and the program range. Anything above $4,000,000 is reviewed case by case before submission. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Does my ownership percentage change how much I can borrow?
Yes. Business statements generally require at least 25% ownership, and many programs count income in proportion to your share. A 60% partner and a 30% partner with identical deposits will have different qualifying income. A partner under 25% typically uses personal-account deposits instead.
Can I qualify if my K-1 shows a loss?
Often, because the lender reads deposits, not the K-1 income line. The file is reviewed on documented income under the applicable program, subject to lender guidelines. If distributions are thin, asset allowance or assets-only paths may apply on primary and second homes.
Will K-1 income help me finance a rental property?
It does not raise a DSCR ratio. A DSCR loan reviews the property’s rent against its monthly obligation, so strong K-1 income will not rescue weak rent coverage. K-1 distributions can help show reserve funds, though.
Do I still need to provide my K-1?
Usually yes, as ownership proof alongside the operating agreement and entity records. It documents your percentage rather than setting your income. The statements carry the income evidence.
Where to Go From Here
Pull your last 12 to 24 months of statements and sort the deposits into distributions, transfers, and one-offs. That one exercise tells you most of what an underwriter will conclude.
Lendmire is a mortgage broker, not the lender, and consumer mortgage lending is licensed in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. Nothing here is a commitment to lend.
For current guidelines, see Lendmire’s super jumbo bank statement loan programs page.
Partners whose cash flow is real but invisible on the tax return tend to find the lending world has more room than they expected.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire (NMLS# 2371349) connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review on DSCR files, which suits self-employed operators and larger portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS, Partner’s Instructions for Schedule K-1 (Form 1065)
2. Scotsman Guide, Rev Up the Engine for Non-QM Lending
3. Fannie Mae Selling Guide, Schedule K-1 Income
This article is part of Lendmire’s super jumbo bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Bank Statement Jumbo Loan Works in Telluride · How Much Can Authors Borrow With a Bank Statement Loan? · How Much Can Content Creators Borrow With a Bank Statement Loan?
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.