The Quick Read: To refinance a bank statement loan, you submit a fresh set of 12 or 24 months of bank statements, the underwriter removes deposits that are not real income, applies an expense factor to business accounts, and averages what remains over the window, so the window you choose and how clean your deposits are decide the qualifying income. The refinance is a brand-new underwrite. Your old approval does not carry over.
- What gets averaged: eligible deposits only, after transfers, loan proceeds, refunds and one-time windfalls are removed.
- Window choice: a rising income trend usually favors 12 months, while uneven or seasonal income often reads better over 24.
- Leverage depends on occupancy: on an owner-occupied cash-out, up to 80% LTV; on an investment-property cash-out, around 75% LTV. Both are subject to lender guidelines.
- Prepare first: collect every page of every account, label unusual deposits, and stop moving money between accounts.
- Rental alternative: if the property is a rental, a DSCR loan tests the property’s rent instead of your personal deposits.
What Is a Bank Statement Refinance?
A bank statement refinance replaces an existing mortgage with a new one that is reviewed around deposit history instead of traditional personal-income documentation. It is a non-QM loan, meaning it falls outside the standard agency documentation box. It fits self-employed borrowers whose write-offs shrink taxable income without shrinking real cash flow.
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Scotsman Guide describes the standard case. A self-employed borrower without a W-2 provides 12 to 24 months of personal or business bank statements. The lender then calculates qualifying income using an expense factor. Some lenders accept a profit-and-loss statement or an expense statement from a third-party tax professional instead.
Across Lendmire’s wholesale network, the pattern is consistent. The borrower is reviewed on documented income under the applicable program, subject to lender guidelines. Many programs start from 12 months of statements, and some lenders allow or prefer a 24-month lookback. The program sheet of the specific lender decides.
How Does a Refinance Differ From the Original Loan?
A refinance is underwritten from scratch. Nothing from the first approval is reused: not the income figure, not the window, not the expense factor. The underwriter looks at your most recent statements, which should end close to the new application date.
That has practical consequences:
- Income can move either way. If your deposits grew since the first loan, qualifying income can rise. If they fell, it can drop below what you qualified on before.
- Your own mortgage shows up in the statements. The payment debits on your current loan are normal. The underwriter expects them and does not count them as deposits.
- Cash-out proceeds from an earlier transaction are not income. If a prior loan’s proceeds landed in your account, they come out of the average.
- The refinance goal changes leverage. Rate-and-term and cash-out refinances carry different leverage limits, and the limits differ again by occupancy.
You are not required to use the same window as last time. The window is a program rule combined with a borrower choice, and the lender decides what it will accept.
How Do Deposits Become Qualifying Income?
Deposits become income through a five-step calculation: sum the eligible deposits, adjust for ownership, apply the expense factor, divide by the number of months, and use that monthly figure in the debt-to-income test. Each step has a place where a file can gain or lose income.
1. Pick the account type. Personal statements, business statements or a combination are all in play, depending on how you get paid and what the program allows.
2. Scrub the deposits. Underwriters remove transfers between your own accounts, loan proceeds, refunds and one-time windfalls. Only repeatable business receipts stay.
3. Apply the expense factor to business accounts. Business deposits are treated as gross revenue, so the lender subtracts an assumed share for expenses. Scotsman Guide’s example is 50%. That is an illustration of market practice, not a rule, and programs in the network set their own factors. A lower factor generally needs proof, such as a CPA-prepared expense statement.
4. Average over the window. Eligible deposits, adjusted for your ownership share and the expense factor, are divided by 12 or by 24.
5. Run the rest of the file. Credit, appraisal, title, reserves and debt-to-income all follow. Reserves commonly run around six months of the housing payment.
Personal deposits are usually treated closer to face value, but the underwriter still checks that they represent business income. Commingled accounts, where personal and business money mix, force the underwriter to separate the two. That separation takes judgment, and judgment tends to cost income.
Worked Example: Same Deposits, Both Windows
The table below uses abstract income units, not dollars, so you can see the mechanics. Assume a business account with a 50% expense factor, the market example above. These figures are modeled assumptions for illustration only.
| Income trend | Prior 12 mo. | Recent 12 mo. | 12-mo. Result | 24-mo. Result |
|---|---|---|---|---|
| Rising | 100 units/mo | 140 units/mo | 70 | 60 |
| Declining | 140 units/mo | 100 units/mo | 50 | 60 |
| Flat | 120 units/mo | 120 units/mo | 60 | 60 |
Results are monthly qualifying income after the 50% factor.
In the rising case, the 12-month window wins because the leaner older months drop out. In the declining case, the 24-month window wins because it averages in the stronger earlier year. Flat income gives the same answer either way.
Whether a lender will let you pick the more favorable window is a program question. Ask before you assume. A good broker runs both calculations on the same deposit history before choosing a lender.
12 or 24 Months: How to Choose
Choose 12 months when income is climbing, and choose 24 when income is uneven, seasonal or recently down. Run both numbers before you decide, since the better window depends on the shape of your deposits.
| Situation | Window that often helps | Why |
|---|---|---|
| Steady growth | 12 months | Older, lower months fall out |
| Seasonal swings | 24 months | Full cycles smooth the average |
| Recent dip | 24 months | Stronger earlier months stay in |
| One big recent jump | Depends | Lenders may question a single spike |
| Business under 24 months | 12 months | A longer history may not exist |
A few honest caveats apply. A 24-month window does not always beat 12, because it also carries older weak months. A shorter history can sometimes be balanced by strong credit and liquid assets. How much weight that gets varies by lender.
Which Deposits Count and Which Don’t
Eligible deposits are repeatable receipts from your business or work. Ineligible ones are money that moved, was borrowed, or came once. When a deposit looks unusual, label it on the statement or in a short letter before the underwriter asks. For the history angle on this, see Lendmire’s article Bank Statement Mortgage History: 12 vs 24 Months of Deposits.
| Usually counts | Usually removed |
|---|---|
| Customer or client payments | Transfers between your own accounts |
| Repeating platform payouts | Loan proceeds |
| Recurring contract income | Refunds and reimbursements |
| Seasonal sales receipts | One-time windfalls or gifts |
Round-number deposits, large deposits with no paper trail, and sudden moves between accounts all draw questions. Each one that gets removed lowers the average.
Leverage by Occupancy
Leverage depends on how you use the property and what the refinance does. The ceilings below are typical ranges from select lenders in the network, subject to lender guidelines, credit and loan size.
| Property and transaction | Typical maximum LTV |
|---|---|
| Primary residence, purchase or rate-and-term | Up to 90% |
| Primary residence, asset-depletion alternative | Up to 80% |
| Owner-occupied cash-out (primary or second home) | Up to 80% |
| Owner-occupied cash-out, accountant-prepared expense ratio | About 75% |
| Investment property cash-out | Around 75% |
The 90% figure applies to purchase and rate-and-term only. It is not a cash-out ceiling. The cash-out figures also step down by loan size and credit tier. Loan amounts generally run from $125,000 to $3,500,000.
Asset depletion is a different route. Instead of averaging deposits, the lender reviews the borrower’s liquid assets. It can suit a borrower whose deposits are too uneven for either window.
Investment-property purchases on bank statement documentation vary by lender, so treat any single number you see online with caution. Investor-focused leverage guidance belongs on the DSCR side.
Edge Cases Where the General Rule Bends
Investment property or LLC borrower. Bank statement loans for rentals depend on how the file is structured. If the loan is in your personal name and the property is a rental, personal-income underwriting can still apply. If title sits in an LLC, eligibility is subject to lender program requirements, and many investors move to DSCR instead.
Owner-occupied multi-unit. Living in one unit of a small building changes the analysis. See the rules section below.
Commingled accounts. The underwriter must split personal from business, so expect more questions and a lower income figure.
Younger than 24 months in business. The 12-month route is usually the one available. Liquid assets and credit strength can help, depending on the lender.
Missing documentation. Without a CPA letter or profit-and-loss statement, the file generally falls back to the lender’s default expense factor.
Income that dropped. A lower figure may trim the loan amount or push you toward a different structure. It does not always end the file, but it changes the math.
Which Rules Apply to Your Property?
Occupancy decides which disclosure regime governs your refinance. Keep the two categories separate.
Owner-occupied (primary residence or second home). This is a consumer mortgage, and TRID disclosures apply. Under the CFPB’s ability-to-repay guide, the lender must make a reasonable, good-faith determination that you can repay. Bank statements are one way to verify the income the lender must consider. The lender is documenting income differently, not skipping the repayment test.
Non-owner-occupied rental, including a short-term rental. This is a business-purpose loan. Regulation Z excludes credit extended primarily for a business, commercial or agricultural purpose, and TRID does not apply to these loans.
Not every investment property is exempt, though. Compliance Alliance explains that the answer turns on loan purpose, owner-occupancy and unit count. It notes that credit to acquire an owner-occupied rental property can be business-purpose when the building has more than two housing units. Misclassifying a loan is a lender problem, but it shows up as a delay or restructure on your file.
Refinance Step by Step
1. Define the goal. Rate-and-term and cash-out files have different leverage limits, so decide which you need first.
2. Pull the statements. Gather every page of every account for the window, even blank-looking pages.
3. Run both windows. Compare 12-month and 24-month averages on your own deposits.
4. Sort and label deposits. Mark transfers, refunds and one-time items before the underwriter does.
5. Choose personal or business statements. Pick the set that shows the cleanest picture, within program rules.
6. Assemble the income documents. Statements, business verification, and a profit-and-loss statement or CPA expense letter if you want a lower expense factor.
7. Assemble the property documents. Your current mortgage statement and payoff information, plus the usual insurance and title items.
8. Submit and respond. Expect follow-up questions about large or unusual deposits.
Mistakes That Shrink or Stall Your Income
- Moving money between accounts right before applying, which creates transfers to explain.
- Depositing unexplained cash in round amounts.
- Sending incomplete statements with missing pages.
- Assuming 24 months is always better without running both.
- Treating the expense factor as fixed when documentation can change it.
- Applying without checking that cash-out leverage fits your occupancy type.
Bank Statement or DSCR for a Rental?
If the property is a rental you hold for investment, a bank statement refinance is not your only path. A DSCR loan tests the property’s own rent against its monthly obligation instead of your personal deposits, so no traditional personal-income documentation is in play. A bank statement refinance stacks the loan on your personal debt-to-income. DSCR tests each property alone, which tends to suit investors adding properties. Lendmire’s complete DSCR loans guide covers how that works.
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
Lookback period: the number of months of statements the lender averages, usually 12 or 24.
Expense factor: the share of business deposits the lender assumes goes to expenses, which reduces qualifying income.
Non-QM: a mortgage that falls outside standard qualified-mortgage documentation rules, often used for self-employed borrowers.
Commingled account: a single account holding both personal and business money.
Asset depletion: a method that qualifies income from a borrower’s liquid assets instead of from deposits.
LTV: loan-to-value, the loan amount divided by the property’s value.
Frequently Asked Questions
How many months of statements do I need to refinance?
Most programs start from 12 months, and some lenders accept or prefer 24. The program sheet of the specific lender decides, which is why a broker comparing several lenders helps.
Can I switch from 12 to 24 months on the refinance?
Often yes, since the refinance is a new underwrite and is not tied to your first choice. Whether a lender lets you pick the window or sets it for you varies. Running both calculations first shows you which one to ask for.
Should I use personal or business statements?
It depends on how you are paid and what the program allows. Business statements are reduced by an expense factor, while personal statements are typically read closer to face value but checked for true business income. Mixed accounts get split by the underwriter.
What if my income has dropped since the original loan?
Qualifying income can fall, which may reduce the loan amount or change the structure. A 24-month window can cushion a recent dip when earlier months were stronger. A broker can run it against several lenders.
Does cash-out change anything?
Yes. Cash-out carries lower leverage ceilings than a purchase or rate-and-term. Owner-occupied cash-out tops out around 80% LTV, and investment-property cash-out around 75%, subject to lender guidelines.
Next Step
Owner-occupied bank statement lending is available in 16 states, and every file is underwritten individually. Call 828-256-2183 or request a quote.
For current guidelines and terms, see Lendmire’s bank statement loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Scotsman Guide, Rev Up the Engine for Non-QM Lending
2. CFPB, Ability-to-Repay and Qualified Mortgage Rule Compliance Guide
3. CFPB, Regulation Z §1026.3 Exempt Transactions
4. Compliance Alliance, Regulation Z and Investment Properties
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a Bank Statement Loan If Most Deposits Come From One Client? · How to Switch From Deposits to Asset Depletion on a Bank Statement Loan · Can You Get a Bank Statement Loan With a Co-Signer?
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.