Cpa Letter Cut The Expense Factor — The Quick Read: Yes, a CPA letter can lower the expense factor a lender applies to business bank statement deposits, but only within limits set by the program. Instead of the standard flat assumption, a properly scoped letter substitutes a certified, lower percentage tied to the business’s actual overhead. It does not erase underwriting judgment, and it rarely gets a business owner below a documented floor.
A CPA letter is a short, factual statement — not an opinion piece — that certifies what percentage of a business’s gross deposits actually goes to overhead. Lenders use that certified number in place of a flat default when they calculate qualifying income from bank statements. The letter has to be scoped narrowly, tied to filed traditional personal-income documentation, and signed by someone with real credentials. If it isn’t, the file usually falls back to the default.
What Is An Expense Factor, And Why Does It Exist?
An expense factor is the percentage of gross business deposits a lender assumes covers payroll, rent, supplies, and other overhead before the rest counts as personal income. Lenders apply it because a business account holds money that isn’t all take-home pay — some of every deposit funds the operation, not the owner’s household budget.
Personal bank statements skip this step almost entirely. The logic there is straightforward: money hitting a personal account already passed through after-tax spending decisions, so it gets counted close to face value. Business accounts get the haircut because a chunk of every deposit is committed to keeping the business running, not to the owner.
Trade coverage of non-QM underwriting confirms this mechanic as standard across the space — deposits get averaged over a set window, and a flat expense ratio, often 50%, gets applied before the remainder counts as income, according to Scotsman Guide. That default is a blunt instrument. It treats a software consultant with almost no overhead the same as a contractor buying materials and paying five employees. The CPA letter exists to fix that mismatch.
How A CPA Letter Changes The Calculation
The letter replaces the lender’s default assumption with a documented, certified percentage — usually lower, sometimes higher — tied to the business’s actual filed returns. Underwriters don’t just take the borrower’s word for lower overhead. They want a licensed preparer’s signature backing the number, plus a tie-out to tax filings covering the same period as the bank statements.
Across the wholesale bank-statement programs Lendmire’s network places files with, the expense ratio isn’t a single fixed number to begin with. Most guidelines set it by business type: roughly 20% for a service business with no employees, 40% for a business with one to five employees, and 50% for larger staffs or any business selling a physical product. An accountant-provided ratio can replace any of those tiers, and a profit-and-loss method exists too, generally capped around 80% on the expense side. None of that is universal across every lender, and it’s always subject to full underwriting.
Moving the expense factor by even ten or fifteen points can have a real dollar impact. Take a business owner who runs heavy deposit volume through a service-based operation. The difference between the default assumption and a documented lower ratio can lead to a meaningfully larger qualifying-income figure. This is exactly why the letter matters to a high earner whose traditional personal-income documentation understates true cash flow.
What The Letter Actually Has To Say
An usable CPA letter states a specific number. It ties to a specific period. It identifies who’s certifying it. Nothing vaguer will survive review. Underwriters and due-diligence reviewers look for these things: the preparer’s name and credential number, the business’s legal name and EIN, the exact period covered (matching the bank-statement lookback), and a specific percentage. A general comment like “expenses are modest” won’t work.
The letter should also disclaim assurance. That distinction matters more than most borrowers realize.
Key Terms Defined
Expense factor (or expense ratio): the percentage of gross business deposits a lender assumes covers operating costs before the remainder counts as qualifying income.
CPA expense ratio letter: a narrow, factual statement from a licensed preparer certifying a calculated expense percentage tied to filed traditional personal-income documentation for a defined period.
CPA comfort letter: a broader opinion-style letter about a business’s viability or repayment ability — a document accounting standards bodies generally say CPAs should not issue in this context.
Qualifying income: the monthly income figure a lender uses to size the loan, calculated from averaged deposits after the expense factor is applied.
Deposit tracing: the underwriting step where every deposit is reviewed for source and consistency before any ratio gets applied to the total.
Why A Comfort Letter Isn’t The Same Document
People often confuse a CPA comfort letter with a CPA expense ratio letter. The difference matters a lot. A comfort letter gives an opinion on something forward-looking or judgment-based — like business viability, ability to repay, or general financial health. Professional standards bodies treat that as an attest-level opinion. Attest work carries a rigorous compliance framework that a casual letter almost never meets. A well-written letter states plainly that the preparer hasn’t performed an audit, review, or compilation under professional accounting standards. It also states that the preparer isn’t offering an opinion on the business’s viability or ability to repay.
An expense ratio letter is different in kind. It states a historical, calculable fact: expenses divided by revenue, sourced from filed returns, for a stated period. That’s defensible. It doesn’t require the preparer to render judgment about anything uncertain, and it doesn’t put the CPA’s license on the line the way a comfort-style opinion can.
How Low Can The Number Actually Go?
There’s a floor, and the letter doesn’t erase it. Industry practitioner guidance on bank-statement underwriting points to a commonly cited minimum certifiable ratio around 10% in programs that publish this detail — below that, no accountant is expected to certify, because almost no real business runs that lean. Some programs set their own internal floor even higher regardless of what the CPA attests, meaning the letter moves the number, but every program that allows it also caps how far.
This is also where files get flagged after the fact. A public non-QM securitization exception report shows exactly what happens when the paper trail is missing: one loan file used a 15% expense factor, but the profit-and-loss statement and supporting documentation for that number weren’t in the file at all, according to an SEC EDGAR exception filing. That’s not a hypothetical risk. It’s a documented instance of a lower ratio getting used without the backup that’s supposed to justify it — the kind of gap that turns up in due diligence long after closing.
When Chasing A Lower Ratio Backfires
Not every borrower benefits from pushing for a lower expense factor, and that’s worth saying plainly. If a business genuinely runs high overhead — heavy subcontractor payments, inventory purchases, a real payroll — a CPA letter showing a low ratio won’t hold up next to the actual traditional income documentation. Underwriters compare the certified figure against filed Schedule C or business return data, and a mismatch is a fast way to get the file kicked back to the default ratio or worse, flagged for a full re-review.
The smarter approach before requesting a letter: calculate actual expenses first. If real overhead runs close to or above the standard default the lender would otherwise apply, sticking with the flat ratio is often the cleaner path. Chasing a certified number that doesn’t match reality wastes the CPA’s time and can slow the file down without producing an usable letter at the end.
Edge Cases Worth Knowing
Personal bank statement income generally skips the expense ratio question altogether — deposits get averaged directly, with no haircut, because the money already passed through personal after-tax spending. The expense factor conversation is a business-account issue specifically.
1099 or fully commissioned borrowers sometimes get a simpler path. Some programs qualify that borrower type using a flat low expense ratio without requiring a CPA letter at all, since commission income doesn’t carry the same overhead assumptions as a product business.
Co-mingled accounts complicate everything. When personal and business transactions run through the same account, underwriting has to separate the two before any ratio makes sense — a CPA letter doesn’t fix a co-mingling problem, it just adds one more document to reconcile.
Where This Fits A Real Investor File
Are you a self-employed real estate investor? Lenders may look at your personal or side-business cash flow instead of a rental property’s own income. In these cases, the expense factor is often the biggest lever in the qualifying-income math. It can matter more than credit tier or reserve requirements. This is especially true when a borrower’s conventional personal-income paperwork understates real cash flow. This is common among founders, physicians, attorneys, and other high earners. It applies when they’re buying a primary residence or a second home alongside an investment portfolio.
Lendmire’s network places these files across a wide size range. Bank statement financing through select wholesale programs runs from roughly $300,000 up through $30,000,000, split across two ladders: a portfolio non-QM program carrying files to $6,000,000, and a separate bank portfolio jumbo program that carries twelve-month-statement files up to $30,000,000 on its own leverage steps — 65% loan-to-value to $5,000,000, 60% to $10,000,000, and 55% up to $30,000,000, interest-only capped at 60% or the band’s ceiling, whichever is lower. Above $4,000,000, every file in this space gets reviewed case by case before submission, regardless of which ladder it sits on.
Leverage on a primary residence steps down as loan size climbs — typically 90% at the smallest sizes near $1,000,000, tightening through the mid tiers, down to 75% at the top standard credit tier near $4,000,000, then case-by-case review beyond that. Second homes and investment properties generally price about five points lower at every size band. Credit expectations typically start around a 660 floor on the portfolio program, moving to 700 or higher above the super-jumbo threshold. Debt-to-income can run as high as 50% on most files, and reserve requirements typically scale with loan size — roughly three months on smaller loans, six months into the mid-range, and nine months above that.
None of these figures are guarantees. Every one of them is a typical ceiling through select wholesale programs, subject to full underwriting, and every file is reviewed on its own facts.
An experienced bank-statement broker sees the same pattern across files in this space over and over. A strong CPA letter rarely rescues a weak underlying business. But it consistently helps a lean, service-based operation whose owner has been quietly underpaying themselves on paper for tax reasons. The letter works best when it confirms something the standard personal-income documentation already hints at. It doesn’t work well when it contradicts them.
Some borrowers use bank-statement financing alongside a rental portfolio. For these borrowers, it helps to understand how DSCR loans size differently. DSCR underwriting looks at the property’s own rental income, not the borrower’s bank deposits. That’s why the expense-factor conversation never touches a DSCR file directly. Lendmire’s complete DSCR loans guide breaks down how that separate qualification path works for investors juggling both loan types.
Are you wondering whether your business qualifies for a lower ratio? Do you want to know how to ask your accountant for the right kind of letter? You can find a deeper walk-through in Lendmire’s piece on how to use a CPA letter to lower the expense factor on bank statements. It covers the request process in more detail than fits here.
Frequently Asked Questions
Does a CPA letter always beat the default expense ratio?
No. It only helps when the certified percentage is genuinely lower than the default and the underlying conventional income documentation support it. If real overhead runs close to the standard ratio, the letter adds paperwork without adding qualifying income.
Can any accountant sign the letter?
It needs to come from someone with a real, verifiable credential — typically a CPA, enrolled agent, or licensed tax preparer with an EIN and identifiable business relationship to the borrower. A self-prepared P&L with no licensed signature carries far less weight and often gets discounted.
Is a CPA letter the same as asking for a comfort letter?
No, and the distinction matters for the CPA’s own liability. A comfort letter opines on business viability or repayment ability, which professional standards bodies generally discourage. An expense ratio letter states a calculable historical fact — expenses divided by revenue — which is a narrower and more defensible document.
Does this apply to DSCR loan financing?
Not directly. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines, not on the borrower’s personal or business bank statements. The CPA-letter conversation only becomes relevant to a DSCR investor when that same person is also seeking bank-statement financing on a different transaction, like a primary residence purchase.
What happens if the CPA letter isn’t backed by supporting documents?
It risks getting flagged or rejected outright. Real-world exception reporting from a public securitization showed a file where a lower expense factor was used without the profit-and-loss documentation to support it in the file — the kind of gap reviewers catch after closing, per SEC EDGAR.
Are you looking at bank statement financing for a rental purchase or refinance? Do you want to see how the qualifying-income math works for your file? Lendmire can help. We compare options based on the property, your business documentation, and your overall profile.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Self-employed borrowers can compare both super jumbo programs on Lendmire’s self-employed mortgages page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 40 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
1. Scotsman Guide — These Loans Should Take Center Stage
2. SEC EDGAR — COLT Depositor III, LLC ABS-15G Exception Report
Brandon Miller
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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.
