Default Factor vs CPA Letter vs First-Page-Only Bank Statements

The Quick Read: The default factor and the CPA letter are two ways to answer one question on a bank statement loan: how much of your business deposits is really yours to spend. First-page-only statements are not a third way to answer it, because underwriters expect every page of every statement.

• The default factor is a flat expense haircut the lender applies to business-account deposits when you submit nothing else.
• A CPA letter replaces that flat haircut with your real expense-to-revenue ratio, certified by a licensed third-party preparer.
• The letter can raise or lower your counted income, so it is worth requesting only when your real expenses are likely below the lender’s default.
• First-page-only statements are a file-delay trap, not an option. Partial statements get conditioned or suspended.
• A CPA letter does nothing on a DSCR loan, because that file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.

Here is the honest answer on who each option is for. The default factor suits borrowers whose business runs close to the typical expense load for its type, or who want the simplest file. The CPA letter suits borrowers with lean, well-documented expenses who are leaving income on the table. First-page-only is for nobody. If someone suggests it, treat it as a misunderstanding of what underwriters need.

Most of this comes down to a single piece of paper and a single percentage. Get those two right and the rest of the file tends to fall into place.

Side-by-Side

The table below shows how bank statement programs across Lendmire’s wholesale network commonly treat each path. Individual lender sheets vary, so read it as a map, not a promise. The third column describes what happens when partial statements are submitted, not a program anyone offers.

Notice the cash-out row. On an owner-occupied cash-out, the network’s fixed-expense-ratio structure reaches up to 80% LTV, while the accountant-prepared ratio version sits at 75%. Leverage and income are linked, so the letter is not free. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

Key Terms Defined

Non-QM: A mortgage that falls outside the standard “qualified mortgage” category, which lets lenders write their own income rules.

Expense factor: The percentage of business deposits the lender treats as operating costs, so only the remainder counts as your income.

Default factor: The flat expense factor a program applies when you do not document your actual expenses.

CPA letter: A signed letter from a licensed preparer that certifies the business’s real expense-to-revenue ratio, used in place of the default.

LOE (letter of explanation): A short written statement explaining a large or unusual deposit.

LTV (loan-to-value): The loan amount as a percentage of the property’s value.

DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation on the property, used to qualify investor loans.

How the Default Factor Works

The underwriter starts by adding up eligible deposits from the account and period you chose. Transfers between your own accounts, loan proceeds, gifts, and refunds come out first, because they are not income. On a business account, the program then applies its flat expense factor. The result is divided by the number of months, and that is the monthly qualifying income.

Programs differ on how they set the default. Some vary it by business type, headcount, or industry. Others use a single number across the board. Nothing in federal law fixes the number, so each lender writes its own. That is why no one can promise you a universal figure, and why two lenders can return different income from identical statements.

The default is a shortcut. Rebuilding a business’s books from thousands of transactions is slow and subjective, so programs assume a flat percentage and let you document something better if you can.

When the Default Factor Is the Better Fit

The default factor wins whenever the letter would add cost and friction without adding income. Four situations come up often.

Your expenses are typical or heavy. Inventory-heavy businesses, contractors with crews, and restaurants usually carry real expenses at or above any flat haircut. A CPA would certify a ratio no better than the default, and could certify one worse.

Your deposits land in a personal account. Many programs skip the expense factor on personal statements, though deposits must still be identifiable as business income. If your clients pay you directly into a personal account, the default path may already be the lighter one. This is program-specific, so check the sheet.

You want the cleanest file. A letter adds an outside party, a signature, and a license number to verify. Some borrowers prefer to give the underwriter fewer moving parts.

Your preparer will not sign. CPAs can decline broad assurances, and that is their right. A letter that cannot be obtained cannot help you.

The default also carries no risk of a worse number. If the lender’s default is below your true expense ratio, it is the better deal for you, and you would never know unless you asked a preparer.

When a CPA Letter Is the Better Fit

A CPA letter earns its keep when your real expense ratio sits well below the lender’s default. Lean, solo service businesses are the classic case: a consultant, a medical professional with a small overhead, or a designer who works from home with few costs.

The preparer certifies, in writing, your actual expense-to-revenue ratio. The letter typically covers the same period as your statements. It names the business, your ownership percentage, and the years in business, and it identifies the preparer’s license. Your own say-so does not count. Programs differ on who may sign: a CPA, an enrolled agent, or a qualifying tax preparer, and some want the signer to have filed the business’s most recent return.

Three practical points matter here.

Ownership is prorated. If you own part of the business, income is typically counted in proportion to your share, so the letter should state it plainly.

The number must be believable. Underwriters expect the certified ratio to fit the business type. A certified ratio far below what peers show invites questions and may get a second look.

The letter is optional. It is a tool you pick up, not a requirement you must clear. Lendmire’s piece How to Use a CPA Letter to Lower the Expense Factor on Bank Statements covers the mechanics in more depth.

There is a cost to weigh as well, in preparer fees and in your accountant’s time. Run the numbers loosely before you ask. If your tax return shows heavy write-offs, your real expense ratio may be higher than you hope, and the letter will say so. 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.

Default Factor vs. CPA Letter: Same Deposits, Different Answer

The comparison is easiest to see with two borrowers who deposit the same total over twelve months. No dollar figures are needed, only the direction of the move.

Say the first borrower runs a lean consulting practice. Her real expenses are well under the lender’s default haircut. Under the default, the underwriter counts less of her deposits than she actually keeps. With a CPA letter certifying her true ratio, counted income rises, and the file clears a higher purchase price or a stronger debt-to-income position.

Now picture the second borrower, who runs a small contracting business with materials, subs, and vehicles. His real expense ratio is above the default. Under the default, he is credited with more income than his books support. A letter would certify the higher ratio and lower his qualifying income. For him, asking for the letter would be a mistake.

That reverse case is the one most borrowers miss. A letter does not guarantee more income. It guarantees a truer number, and a truer number can be smaller.

If you are weighing the same choice on a vacation or second property, Lendmire’s piece Expense Factor vs CPA Letter on a Second Home Bank Statement Loan adds the occupancy twist.

Why First-Page-Only Statements Are a Trap

Default factor and CPA letter both describe how to calculate income. First-page-only statements are not a calculation method.

Underwriters need the account holder name, the account number, the balances, and the full transaction history. That history is how they spot where deposits come from and catch large, unexplained ones. A first page usually shows a summary and a few lines. It cannot show the pattern.

Across the wholesale network Lendmire works with, the practical rule is consistent: submit every page, including blank pages and footers. A file with partial statements gets conditioned or suspended, and the review stalls until complete statements arrive. Statements also go stale. If they age past the lender’s window, updated ones are requested.

Deposits above a lender-set threshold need a letter of explanation and supporting documents. A first-page-only upload cannot show those deposits, so the underwriter has nothing to explain and everything to question.

Treat it as a document-hygiene rule: full statements, every page, every month, from the account the deposits actually flow through. Borrowers sometimes try partial statements to hide a messy account. It never helps, and a clean explanation of the mess almost always does.

What About DSCR? (Wrong Product for These Tools)

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. The CFPB’s Regulation Z text lists business, commercial, and agricultural credit among the exempt transactions, and a Freddie Mac guide bulletin classes business-purpose loans the same way. Whether any given loan is business-purpose depends on the facts of the transaction and the lender’s review.

Occupancy decides the paperwork. An owner-occupied bank statement loan, whether a primary residence or second home, is a consumer mortgage and follows consumer disclosure rules. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from those disclosure rules. Do not mix the two when you plan a file.

For this comparison, the point is practical. A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Bank statements there verify assets, reserves, and cash to close, not income. No expense factor exists, so a CPA letter changes nothing. The same full-page rule applies, though: the underwriter still wants complete statements. Lendmire’s complete DSCR loans guide explains how those files differ.

Many rental investors are self-employed with heavy write-offs, so the real decision is which product fits. If the rent covers the payment and you would rather skip personal-income analysis, DSCR removes the expense-factor question entirely. If the property is owner-occupied, or you want sizing based on personal income, the bank statement route puts the default-versus-letter choice back in play.

Leverage and Reserves in Context

The network figures matter here. On a primary residence purchase or rate-and-term refinance, select lenders go up to 90% LTV on bank statement documentation, with the strongest files earning the top of that range. On an owner-occupied cash-out, whether primary residence or second home, the ceiling is 80% LTV with the fixed expense ratio and 75% LTV with an accountant-prepared ratio, depending on loan size and credit. Investment-property cash-out tops out around 75% LTV. Investment purchase leverage on bank statement documentation varies by lender, so treat it qualitatively and ask before you plan around it.

Loan sizes generally run from $125,000 to $3,500,000, and reserves commonly sit around six months of the housing payment. These are typical ranges from select wholesale lenders, not commitments, and each file is underwritten individually. Term length follows each lender’s program sheet, so do not assume extended or interest-only structures on an alt-doc loan.

Notice what the letter does to the owner-occupied cash-out cap. A certified ratio can lift your counted income and still lower the maximum LTV. Whether that trade pays depends on whether you need more income or more leverage.

Verdict

Pick the default factor if your expenses are ordinary or heavy, your deposits go to a personal account, or you want the simplest file. Pick the CPA letter if your books show lean, documented expenses and the default is clearly costing you income. Skip first-page-only entirely, because it is not a path and it stalls files.

The honest middle ground is to ask your loan officer what the default factor is for your business type before you call your accountant. If the gap between the default and your real ratio is small, the letter is not worth the fee. If the gap is large and runs in your favor, request it. Then submit every page of every statement.

Lendmire arranges these loans through select wholesale lenders in the 16 states where its consumer mortgage licensing applies. Reach the team at 828-256-2183.

About Lendmire

A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.

References

1. CFPB Regulation Z § 1026.3

2. Freddie Mac Guide Bulletin 2021-19