Declining Deposit Evidence on 12 vs. 24 Month Bank Statements

The Quick Read: Falling deposits show up under either statement window, so the choice changes how visible the decline is, not whether the underwriter sees it. A shorter window shows the drop most directly, while a longer window blends older, stronger months into the average. Underwriters still read the recent trend either way. The right window depends on your income pattern and on what the program allows.

• The window is usually a program rule, not a menu you pick from.
• A longer window can lift the average on paper, but a recent dip still draws questions.
• A recent decline generally reads worse than an old one.
• Expect a written explanation and supporting documents if deposits fell.
• A DSCR loan skips the deposit question because it qualifies the property, not your income.

Here is the honest answer on who each option serves. A 12-month window fits borrowers whose income has held steady or climbed, and whose older months would only drag the average down. A 24-month window fits borrowers with seasonal or lumpy income, because two years smooth the swings. Neither window rescues a business that is clearly shrinking.

Side-by-Side

The 12-month column reflects the structure common in the wholesale network Lendmire places files with. The 24-month column shows published industry norms, which vary by lender.

Leverage is set by the program and occupancy, not by the window alone. On a primary residence purchase or rate-term refinance, select lenders in the network go up to 90% LTV. LTV, or loan-to-value, is the loan balance as a share of the property’s value. On an owner-occupied cash-out, the ceiling is up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. On an investment-property cash-out, leverage tops out around 75% LTV. Investment purchases on bank statements vary by lender.

What Underwriters Mean by Declining Deposits

Underwriters separate three different patterns, and each reads differently.

• A lower average. The recent months simply total less than the older months. This is the mildest case.
• A negative slope. Deposits keep falling month after month, which raises the question of where they stop.
• One soft stretch. A single weak quarter inside an otherwise steady record. This is usually the easiest to explain.

The underwriter wants to know whether the recent level is sustainable. A lender cannot lean on an average built from months that no longer reflect your business. That is why a dip in the last few months matters more than a dip eighteen months ago.

A Modeled Example: How the Window Moves the Number

These are modeled index numbers, not real deposits. Set an average monthly eligible deposit of 100 as the baseline.

• Rising income. The earlier 12 months average 80 and the recent 12 average 100. The 12-month figure is 100. The 24-month figure is 90. The shorter window helps.
• Flat income. Both years average 100. Both windows give 100. The choice barely matters.
• Falling income. The earlier 12 months average 120 and the recent 12 average 100. The 12-month figure is 100. The 24-month figure is 110. The longer window looks better on paper.

That last line is where the confusion starts. A 110 average looks like a rescue, but a lender looking at the recent months sees a business running at 100 and sliding. Some programs use only the recent 12 months of a longer submission for exactly this reason. Others accept the blended figure but ask hard questions. The average you submit is not always the average the lender uses.

When the 12-Month Window Is the Better Fit

Choose the shorter window when your recent income is your strongest income. A borrower who landed new clients, raised prices or expanded a business last year gains little from older, weaker months.

It also fits borrowers who want less paperwork. Twelve months of statements means less sorting of transfers, fewer one-time deposits to source and a cleaner story. On most files in the network, 12 months of statements is the standard documentation, so you are often working within the common structure rather than asking for an exception.

The risks are real. A 12-month window can overstate income if your busiest season falls inside it. It also puts one weak quarter in plain view, because there are no older months to dilute it. If your last three months are your weakest, the shorter window gives you nowhere to hide. Hiding is not the goal anyway, since underwriters read the trend either way.

When the 24-Month Window Is the Better Fit

Choose the longer window when your income swings with the calendar or with project cycles. Contractors, agents, seasonal operators and commission earners often have strong and weak stretches that wash out over two years. A longer record also reads as more stable on larger loan sizes, where scrutiny tends to rise. The network’s loan amounts run from roughly $125,000 to $3,500,000.

The longer window can help a borrower whose latest year was unusually weak for a one-time reason, such as a health event. It lets the underwriter see that the dip is out of character.

It does not work for a business in steady decline. Two years of statements mean twice the sorting, and twice the chance an underwriter finds commingled accounts or unexplained deposits. Lendmire’s piece 12 vs 24 Month Bank Statements When Income Declined covers the borrower’s side of that problem in more depth.

A short word on a common claim: some people say 24 months masks a decline, and others say it never can. Both are partly right. The longer window can lift the arithmetic average. It cannot hide the recent trend from an underwriter who reads the statements month by month.

What Happens When Underwriters Find a Decline

A decline does not end a file automatically. It changes the questions. Typical responses on bank statement files include:

• a request for a written explanation of the drop;
• a more conservative average, such as only the most recent 12 months;
• added documentation, such as a profit-and-loss statement, an accountant’s letter, contracts or invoices;
• a finding that the file is ineligible under that particular program.

Four factors move the outcome: how recent the dip is, how steep it is, what caused it and how well you document it. A modest or seasonal dip is often workable. A steep, ongoing slide is the risk, and that holds under either window.

Match the documents to the cause:

• Lost client or contract. Show replacement work, new contracts or a pipeline.
• Seasonality. Show the same pattern in prior seasons, which is where the longer window helps.
• A one-time spike the year before. Show that the earlier months included a windfall, so the baseline was inflated.
• Health or time away. Show a return to normal activity in recent months.
• Business sold or left. Expect the pre-sale average not to count at all.

Clean accounts help in every case. Mark transfers between your own accounts, keep loan proceeds and gifts out of the operating account, and separate business from personal money. Commingled accounts force the underwriter to sort the deposits, and sorting usually lowers the income.

Business statements typically carry an expense factor, a percentage of deposits treated as business costs rather than income. Personal statements usually count eligible deposits at or near full value. The lender sets the factor, often from the type of business and any accountant support, so you do not choose it. Across the network, the factor and eligible deposits vary by program, and strong files may justify better terms.

The Rule Behind the Documentation

Why does the lender care so much? The federal ability-to-repay rule, 12 CFR 1026.43, requires a reasonable, good-faith determination that you can repay. It also requires verifying the income or assets the lender relies on, using reasonably reliable third-party records. The rule sets no 12-month or 24-month lookback, so the window is a program guideline rather than a federal requirement.

The CFPB’s compliance guide adds that a creditor generally cannot rely on what consumers say about their income. It also notes that records prepared by the consumer or broker can count if an appropriate third party reviews them. In practice, a lender must be able to defend the income figure it used. A declining trend makes that harder, so lenders respond to it.

One disclosure point depends on the property. An owner-occupied bank statement loan, such as a primary residence or second home, is a consumer mortgage with the usual consumer disclosures. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from those disclosures.

Where DSCR Fits If Deposits Are Falling

Most explainers blur two different products here. Bank statement loans measure your income. A DSCR loan measures the property. DSCR stands for debt service coverage ratio, which is the monthly rent divided by the full monthly housing obligation.

A bank statement loan, by contrast, can be used on a primary residence, which DSCR cannot.

Say you are self-employed, had a down year, and plan to buy a rental. If the rent comfortably covers the monthly obligation, a DSCR loan sidesteps the deposit-trend question. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your bank statements still matter, but for funds to close and reserves rather than income. The reverse also happens: if the rent does not cover the payment but your personal income is strong, a bank statement loan can fill the gap.

Both products are growing. HousingWire reports non-QM lending of about $239 billion in a recent year, with bank statement loans at 34% of volume and DSCR loans at 29%.

You can see how Lendmire’s investor products work in its complete DSCR loans guide. For the narrower window question, Lendmire also explains the difference between 12-month and 24-month statements. 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.

Key Terms Defined

Alt-doc loan: a mortgage that is reviewed around documents other than traditional personal-income documentation and pay stubs, such as bank statements.

Eligible deposits: deposits that count as income after transfers, loan proceeds, gifts and one-time windfalls are removed.

Expense factor: the share of business deposits a lender treats as operating costs, which lowers qualifying income.

Trend check: the underwriter’s review of whether income is rising, flat or falling, apart from the average.

Non-QM: a loan that does not meet the standard qualified-mortgage definition and uses its own documentation rules.

The Balanced Verdict

Pick the 12-month window if recent income is your best income and your records are clean. Pick the 24-month window if your income is seasonal or uneven, or if one weak stretch sits inside an otherwise strong record. If deposits are clearly falling, neither window fixes the underlying issue, and the stronger move is to document the cause, wait for steadier months or consider whether a DSCR structure fits the property.

Ask your broker to run both calculations before you commit. The two averages can differ meaningfully, and the gap tells you how much your file depends on the window.

Next Step

Lendmire is a broker that arranges financing through select lenders in its wholesale network, and qualification is subject to lender guidelines.

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 tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. 12 CFR 1026.43

2. CFPB ATR/QM Small Entity Compliance Guide

3. HousingWire non-QM loans guide