CPA Letter Changes The Expense Factor On A Bank Statement Loan — The Quick Read: A CPA letter replaces a lender’s default expense assumption with your accountant’s certified, business-specific number. If your real costs run lower than the default, qualifying income goes up. If your real costs run higher, the letter can actually work against you — so it is not automatically the right move.
A CPA letter changes the expense factor by swapping a generic, business-type assumption for a signed, documented figure from a licensed tax preparer. Lenders use the expense factor to estimate how much of your business deposits went to overhead before counting the rest as income. A lower certified ratio raises qualifying income; a higher one lowers it. The letter only helps when your accountant can show your actual costs run meaningfully below the lender’s default.
Key Terms Defined
Expense factor — the percentage of business bank deposits a lender assumes covered operating costs, subtracted before the rest counts as qualifying income.
Bank statement loan — a mortgage that qualifies a self-employed borrower using deposit history instead of traditional personal-income documentation.
CPA letter — a signed statement from a licensed accountant, enrolled agent, or other qualifying tax preparer certifying a business’s actual expense ratio.
Qualifying income — the monthly income figure a lender uses to calculate debt-to-income, arrived at by applying the expense factor to average deposits.
Non-QM loan — a mortgage underwritten outside standard qualified-mortgage rules, which is why bank statement and expense-factor documentation exist in the first place.
What Is the Expense Factor, and Why Does It Exist?
Lenders can’t see your actual profit and loss from a bank statement alone. A statement shows money coming in and going out — it doesn’t separate payroll, rent, and supplies from personal draws. So the industry built a shortcut: apply a flat percentage to gross deposits and assume the rest is income.
Across the wholesale programs Lendmire places files with, that shortcut usually isn’t one flat number for every business. Most set the expense factor by business type and headcount. A solo service business with no employees — a consultant, a designer, a one-person brokerage — typically lands around a 20% factor. A small operation with one to five employees usually runs near 40%. A business with six or more employees, or any product-based business carrying inventory, usually defaults to 50%. Some files also allow a profit-and-loss method instead, capped around 80% of revenue.
Those defaults exist because they’re conservative guesses. A CPA letter exists to replace the guess with the truth.
How Much Can a CPA Letter Change the Expense Factor?
A CPA letter substitutes your certified ratio for the lender’s default, and the swing runs in either direction depending on which one is actually higher. If your accountant certifies a ratio well below the network default for your business type, qualifying income rises by roughly the same percentage the ratio drops. A service business defaulted at 40% that certifies down to 20% can see qualifying income jump by a third or more, because a smaller share of deposits gets treated as overhead.
The direction matters as much as the size of the gap. If your certified ratio comes in above the default — common for restaurants, contractors, and other high-overhead businesses — the letter certifies a worse number than you’d have gotten by doing nothing. That’s the single most common mistake self-employed borrowers make when they hear “CPA letter” and assume it’s always a lever to pull.
Before requesting one, ask your accountant to run a rough actual expense ratio for the trailing 12 to 24 months. If it beats the default meaningfully, the letter is worth pursuing. If it’s close to the default, or worse, skip it — a letter certifying 45% when the file would otherwise default to 40% doesn’t help and adds a step to underwriting.
What Does the Letter Actually Have to Say?
The letter has to be specific, dated to the right window, and signed by someone licensed to make the claim. A borrower cannot self-certify an expense ratio — the certification has to come from a CPA, an enrolled agent, or another qualifying tax preparer, and it has to identify the preparer by name, credential, and license or registration information.
Circular 230 sets the federal rules for who can make this kind of representation to a tax authority. It sets conduct standards for attorneys, CPAs, and enrolled agents who practice before the IRS. Enrolled agents hold their own federal credential. The IRS recognizes them directly, alongside CPAs, as authorized tax practitioners. That’s why most programs accept a letter from either credential — not just from a CPA.
Beyond the preparer’s credentials, the letter needs to state the exact statement period it covers, identify the business, and state the certified expense ratio in plain terms. A vague letter that just says “expenses are reasonable” without a number won’t satisfy underwriting. It needs a figure a loan file can actually calculate against.
Is There a Floor on How Low the Ratio Can Go?
Yes — no program lets a certified ratio drop to zero, no matter how lean the business looks on paper. Across the wholesale network Lendmire works with, the fixed-ratio structure already builds in a conservative baseline by business type: 20% for a solo service business, 40% for a small team, and 50% for larger or product-based operations. Even so, an accountant-certified ratio still has to hold up to underwriter review — it isn’t simply accepted at face value.
This is the part borrowers underestimate. A CPA letter isn’t a blank check to certify whatever number makes the file work. Underwriters look at whether a certified ratio is plausible for that industry, that headcount, and that revenue level. A retail business certifying a 12% expense ratio is going to draw a second look, because it doesn’t match how that kind of business typically runs. The letter needs to be defensible, not just favorable.
Bank Statement Loans vs. DSCR — Where Does the CPA Letter Even Apply?
The CPA letter and expense factor only matter when a lender is qualifying you — your personal or business income — rather than qualifying the property. That’s the core distinction between a bank statement loan and a DSCR loan.
DSCR loans are built for non-owner-occupied investment properties. They are business-purpose investor loans, so lenders review them differently than a standard owner-occupied mortgage. A DSCR file typically qualifies mainly on whether the property’s rental income covers the payment, subject to lender guidelines. It doesn’t rely on your personal deposits, traditional personal-income paperwork, or an expense factor at all. If you’re buying a rental and the rent covers the payment on its own, an expense-factor discussion usually doesn’t apply to that file. Lendmire’s complete DSCR loans guide walks through how property-income qualification actually works.
The two programs overlap for one type of investor: someone who also runs a business — a contracting company, a property management LLC, a consulting practice — and needs bank statement qualification. That investor might need it for a primary residence purchase, a business-purpose refinance on an owned property, or to document reserves and seasoned funds ahead of a DSCR purchase. For this investor, understanding the expense factor and CPA letter mechanic actually matters. Lendmire’s related breakdown on whether a CPA letter affects the expense factor covers that overlap in more depth.
Sizing the File: What a Lower Expense Factor Actually Buys
A lower certified ratio raises qualifying income, which raises how much loan the deposits can support — but the size and leverage still run on the same ladder as every other file. Across the two wholesale programs Lendmire arranges files through, loan amounts run from $300,000 up through $30,000,000: a portfolio non-QM program carrying files to $6,000,000, and a bank portfolio program carrying twelve-month-statement files on its own ladder — 65% loan-to-value to $5,000,000, 60% to $10,000,000, and 55% up to $30,000,000, with interest-only capped at 60% or the band’s ceiling, whichever is lower.
On a primary residence, leverage steps down as the loan size climbs: typically 90% at $300,000 to $1,000,000 with a 680 credit floor, stepping to 85% through $2,000,000, then down through the $3,000,000-$4,000,000 range as credit and reserve requirements tighten, before shifting to case-by-case review above $4,000,000 and onto the bank program’s own ladder above that. Second homes and investment properties generally run about five points lower in leverage at every size tier than a primary residence would.
Documentation typically runs 12 or 24 consecutive months of bank statements, and transfers from your own business into a personal account count in full toward eligible deposits — no additional discount applied on top of the expense factor. Credit floors typically sit around 660 on the portfolio program (680 on the bank program, stepping to 700 above the super-jumbo line), with debt-to-income allowed up to roughly 50% and reserve requirements generally running three months on smaller loans, six months in the middle tiers, and nine months on larger ones.
In practice, a certified ratio makes the biggest difference for solo or small-team service businesses. Think consultants, medical practices set up as an S-corp, real estate agents, or attorneys. These businesses often have real overhead well below the network’s blended default for larger or product-based businesses. On files near $4,000,000 and above, every leverage figure gets reviewed case by case before submission. This happens no matter how good the expense ratio looks. So a stronger certified income figure helps the debt-to-income math, but it doesn’t skip that review step.
Investors weighing whether the effort is worth it should treat the gap size as the deciding factor: a certified ratio that beats the default by a wide margin is usually worth the ask; a marginal gap rarely is, and a business with genuinely high overhead is often better off leaving the default alone. Lendmire’s guide on how to use a CPA letter to lower the expense factor breaks down that decision in more detail for borrowers weighing the trade-off.
This is a totally separate paperwork path, used only for DSCR rental purchases. Appraisers use it to estimate market rent for a single-family investment property. The tool is Fannie Mae’s Form 1007 comparable rent schedule. That name is just a reference — DSCR programs aren’t agency products themselves. As one appraisal explainer puts it, the form is “a vital document in the appraisal process for investment properties.” Appraisers use it to estimate comparable market rent. They are not netting down actual bank deposits. That’s a completely different calculation than an expense-factor conversion.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Frequently Asked Questions
Can I write my own expense ratio letter as a business owner?
No. The certification has to come from a licensed CPA, enrolled agent, or other qualifying tax preparer — not the borrower. Underwriters treat self-certified numbers as unverifiable, since the whole point of the letter is an independent, credentialed opinion on your actual cost structure.
What if my CPA has never written one of these before?
That’s common, and it isn’t a dealbreaker. The letter needs specific elements — preparer credentials, the exact statement period, and a stated expense ratio — so sharing those requirements with your accountant ahead of time usually resolves it. Most CPAs can produce this once they understand exactly what the lender needs.
Does a CPA letter guarantee a better loan outcome?
No. It replaces an assumption with a documented figure, and that figure can come back higher or lower than the default depending on your actual cost structure. Underwriters also review certified ratios for plausibility against your industry and headcount, so the letter is reviewed, not automatically accepted.
Should I get a CPA letter if I’m buying a rental property instead of a primary residence?
It depends on how you’re qualifying. A DSCR purchase on a rental property typically qualifies primarily on the property’s own rental income, subject to lender guidelines, so an expense-factor conversation usually isn’t part of that file. A CPA letter matters more when your personal or business bank statement income is the qualifying source, such as a primary residence purchase or a business-purpose refinance where deposits are being used.
Is there a maximum loan size where this stops applying?
Across the wholesale programs Lendmire arranges files through, bank statement qualification runs from $300,000 up to $30,000,000, though every file above roughly $4,000,000 gets reviewed case by case before submission regardless of the certified expense ratio. Above that size, the file is judged on the full credit, reserve, and documentation picture together, not just the qualifying income figure. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
If you’re weighing a bank statement loan against a rental purchase that might qualify on property income instead, Lendmire can help compare how the numbers work across both paths based on your income documentation, credit profile, leverage, and goals. Reach Lendmire at 828-256-2183 or request a quote to see which structure fits your file.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 40 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
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References
1. IRS — Office of Professional Responsibility and Circular 230
2. Fannie Mae — Appraiser Update: Form 1007 Comparable Rent Schedule
3. GetBlueprint — What Is Form 1007?
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.
