How A CPA Letter Lowers The Expense Factor On A Bank Statement Loan — The Quick Read: A CPA letter replaces a lender’s default expense assumption with a certified number from your accountant. Bank statement programs assume a chunk of your business deposits goes to overhead before they count any of it as income. A licensed preparer can certify your real number instead — and if your actual costs run leaner than the default, more of your deposits count as qualifying income. If your business runs heavier expenses than the default, the letter can work against you. It’s a tool, not an automatic upgrade.
What Is An Expense Factor, And Why Does It Exist?
Business bank statement loans qualify self-employed borrowers off deposits, not traditional personal-income documentation. Since a lender can’t audit your books, it applies a flat assumption for overhead before counting the rest as income.
Lendmire places files through wholesale programs, and that fixed ratio typically works like this: 20% for a service business with no employees, 40% for a business with one to five employees, and 50% for a business with six or more employees or any business that sells a product. These numbers are starting assumptions. They don’t judge your actual costs. A solo consultant with a 20% ratio and a six-person landscaping company with a 50% ratio get treated very differently on the same file — even before either one produces documentation.
This convention isn’t a federal rule.
What Does A CPA Letter Actually Change?
A CPA letter swaps the lender’s default assumption for a documented, certified number from a licensed preparer. Instead of guessing your overhead at 40% or 50%, the underwriter uses whatever ratio your CPA, enrolled agent, or qualifying tax preparer puts in writing — provided it’s supported by your actual books and tax filings.
The math is simple once you have the number: deposits times one minus the certified ratio equals qualifying income. Say your business runs a genuinely lean operation — a consulting practice, a design studio, a solo trade with almost no overhead. If your real expense ratio comes in well under the fixed default your file would otherwise use, the CPA letter can meaningfully raise the income the lender counts. Run the same math the other direction for a contractor or restaurant owner whose real costs run heavier than the default, and the letter can lower qualifying income instead of raising it. That’s the trade you’re making by requesting one — it isn’t automatically a win.
Who Can Write The Letter, And What Must It Contain?
The letter has to come from a credentialed preparer — a CPA, an enrolled agent, a CTEC-certified tax preparer, or a tax attorney. Self-certification by the borrower doesn’t meet the standard.
Industry guidance points to a consistent list of required contents for these letters. The preparer must include their full name, professional title, license or credential number, firm name, and contact information. The letter must identify the business by its legal name and EIN or DBA. It must state the specific statement period the letter covers, and this period must match the bank statements in the file. The preparer must certify that they reviewed the business’s financial records. And the preparer must confirm they completed or filed the borrower’s most recent business tax return. A verbal estimate or a casual email from an accountant doesn’t meet this standard. Underwriters — and any third-party due-diligence reviewer who checks the file later — expect the full package.
There’s also a floor. A certified ratio generally can’t go below roughly 10% regardless of how lean the business runs, though some individual lender guidelines set a higher program-specific floor. On Lendmire’s network, the fixed-ratio tiers of 20%, 40%, and 50% sit alongside the accountant-provided path and a profit-and-loss method capped at 80% — so a borrower with an unusually complex business isn’t limited to a single fixed number if the documentation supports something more specific.
When Does The CPA Letter Help — And When Does It Backfire?
It helps when your real overhead runs meaningfully below the default your file would otherwise use — think 25 percentage points of daylight or more. It backfires when your actual costs run heavier than the default, because the letter certifies a documented, often higher, number in place of a flat assumption that was already generous.
A management consultant or independent contractor with minimal overhead is the classic case where the letter pays off — real expenses well under 40% against a default that assumes far more. A restaurant owner or a contractor carrying heavy payroll and materials cost is the opposite case — real overhead can run 65% to 80% of revenue, well above any fixed-ratio tier, and certifying that number in writing only lowers what counts as income.
There’s also a marginal zone where the letter isn’t worth pursuing either way. If your actual expenses land close to whatever fixed ratio your business type already qualifies for, paying for a CPA letter to shave a few points off doesn’t move the needle enough to justify the time or cost. The letter earns its keep on a real gap, not a rounding error.
Does This Apply To DSCR Loans Too?
No. The expense factor and CPA letter mechanic applies only to bank statement lending, where a borrower’s personal or business cash flow determines qualifying income. A DSCR loan works differently — it qualifies primarily on the property’s own rental income covering its payment, subject to lender guidelines. So there’s no business-expense ratio to certify in the first place. The CFPB’s own commentary on non-QM underwriting backs this up: there’s no fixed formula for how much income should support a given debt load. Lenders build their own guidelines, and expense factors are just one of those internal conventions — not a legal requirement.
That distinction matters for investors who use both tools. Take a rental purchase that clears its coverage ratio on its own rent. This usually runs through DSCR financing. Lenders estimate rent using appraisal forms like Fannie Mae’s Form 1007 rent schedule for single-family comparables, or a Form 1025 for small income properties on 2-4 unit deals — per industry guidance on those appraisal forms. But a primary residence works differently. So does a property that won’t independently clear a coverage threshold, or a file where personal income has to help carry the qualification. In these cases, bank statement financing — and the expense factor question — comes into play instead.
What Does This Look Like At High Loan Amounts?
Across the wholesale network Lendmire works with, business bank statement financing for high-net-worth, self-employed borrowers runs from $300,000 to $30,000,000 through two distinct programs — a portfolio non-QM path carrying files to $6,000,000, and a separate bank-portfolio program built on twelve-month statements that carries its own ladder to $30,000,000: 65% loan-to-value to $5,000,000, 60% to $10,000,000, and 55% up to the $30,000,000 ceiling, with interest-only available at 60% or the band’s own ceiling, whichever is lower.
Leverage on a primary residence steps down as the loan size climbs — 90% to $1,000,000, 85% to $2,000,000, 80% to $3,000,000, and 75% at the top credit tier to $4,000,000 on most files. Above $4,000,000, every file moves to case-by-case review before it’s even submitted — never treat that as a flat “up to” number. Second homes and investment properties generally run about five points lower in leverage at every size band than a primary residence on the same program.
The expense factor question sits underneath all of this. Whether a self-employed borrower’s file qualifies at 20%, 40%, or 50% expense ratio — or at a CPA-certified number instead — directly sets the income the rest of that leverage ladder gets applied against. A borrower sitting at $2,500,000 with a strong CPA letter showing real overhead well under the fixed default may qualify at a materially higher income than the same deposits would support under the flat assumption, which can be the difference between qualifying at 80% and needing more money down.
Credit generally needs to clear a 660 floor on the portfolio program, rising to 700 above the super-jumbo threshold that kicks in above $3,500,000 on a primary residence or $3,000,000 on a second home or investment property. Reserve requirements scale with loan size too — typically three months of payments up to $500,000, six months up to $1,500,000, and nine months above that, plus additional months per other financed property in most files.
Working through a lot of these files across a wide range of businesses, one pattern shows up constantly: borrowers assume the CPA letter is a one-way upgrade, and it just isn’t. The strongest files run the numbers both ways before requesting anything — comparing the fixed-ratio outcome against a rough estimate of the actual expense ratio — because a $200 to $500 letter that certifies a worse number than the default is money and time spent working against yourself.
Key Terms Defined
Expense factor (or expense ratio): the percentage of business deposits a lender assumes goes to overhead before counting the remainder as qualifying income.
CPA letter (expense ratio letter): a written statement from a CPA, enrolled agent, CTEC-certified preparer, or tax attorney certifying a business’s actual expense ratio for a specific statement period.
Qualifying income: the monthly income figure a lender uses to size a loan, calculated as deposits multiplied by one minus the applicable expense ratio.
DSCR (debt service coverage ratio): a measure of whether a rental property’s own income covers its monthly payment, used in property-level investor financing instead of personal income documentation.
Business-purpose loan: financing extended for an investment or income-producing property rather than a primary residence, reviewed under different rules than a standard owner-occupied mortgage.
Frequently Asked Questions
Can I write my own expense ratio letter if I understand my business finances?
No. The letter has to come from a credentialed preparer — a CPA, enrolled agent, CTEC-certified tax preparer, or tax attorney. A borrower’s own estimate of their overhead, however accurate, doesn’t meet the documentation standard underwriters look for.
How do I know if a CPA letter will help or hurt my file?
Compare your actual overhead to the fixed ratio your business type already qualifies for under the default assumption. If your real costs run well below that default — a meaningful gap, not a few points — the letter usually helps. If your real costs run above it, requesting the letter can lower your qualifying income instead of raising it.
Does a CPA letter apply if I’m buying a rental property instead of a primary residence?
The expense factor mechanic is a bank statement lending concept tied to personal or business cash flow, not a DSCR loan. A DSCR loan is reviewed primarily on the property’s rental income covering its payment, subject to lender guidelines, so there’s no expense ratio to certify on that leg of the file — though bank statement financing and DSCR loans are sometimes used together across a larger portfolio.
What if my actual expenses fall right around the fixed ratio my business already qualifies for? It’s usually not worth pursuing a CPA letter in that case. The value of the letter comes from a real gap between your certified number and the default — a marginal difference of a few percentage points rarely justifies the cost or time of getting one drafted.
Is there a limit to how low a CPA can certify my expense ratio?
Generally yes — certified ratios typically can’t go below roughly 10%, even for extremely lean businesses, though the exact floor depends on the specific lender’s guidelines. Some programs set a higher program-specific minimum than others.
Are you weighing bank statement financing against a DSCR loan for an investment property? Lendmire can help you compare the two. We’ll look at the property’s income, your credit profile, leverage, and your broader investment goals. Reach out anytime to walk through the options.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 39 states plus Washington, D.C. — 40 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Holland & Knight – CFPB ATR/QM Rule Amendment
2. GetBlueprint – What Is Form 1007
3. McKissock Learning – Form 1007 Short-Term Rental Appraisals
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.
