How To Set The Expense Factor On A Super Jumbo Bank Statement Loan — The Quick Read: The expense factor is not something a borrower sets on their own. It’s a percentage an underwriter subtracts from average monthly business deposits to estimate real qualifying income, and it’s driven by business type and documentation, not preference. Fixed defaults run 20%, 40%, or 50% depending on how the business is staffed. A CPA-documented ratio, or a profit-and-loss statement capped at 80%, can move that number — but only with paperwork that survives underwriting review.
Most borrowers who ask “how do I set my expense factor” are really asking a different question: how do I get a lender to accept a lower deduction so my qualifying income is higher? That’s the right instinct. It’s also the wrong framing. The factor isn’t negotiated. It’s documented, or it defaults.
Key Terms Defined
Expense factor — the percentage of gross bank deposits an underwriter treats as business overhead and subtracts before counting the rest as qualifying income.
Qualifying income — the monthly income figure that actually feeds into debt-to-income calculations, calculated as average eligible deposits minus the expense factor.
CPA letter — a signed statement from a licensed accountant that documents the business’s real expense ratio, used to override the fixed default when the borrower’s actual costs run lower.
P&L method — an income-qualification path built off a profit-and-loss statement instead of a flat deposit deduction, generally capped well below full deposit credit.
Super jumbo — in this context, a bank statement loan sized well above conventional jumbo limits, typically running from roughly $3 million up through $30 million depending on the program.
Why Lenders Apply an Expense Factor at All
A business bank account mixes revenue with the cost of running the business — payroll, materials, rent, vendor payments. None of that shows up as a separate line item on a bank statement. The expense factor exists to approximate what’s left over after those costs, without asking the underwriter to reconstruct a full income statement from deposit slips alone.
A personal bank account works differently. Personal deposits are presumed to already be net of business costs, so most programs count 100% of personal account deposits toward qualifying income. Business account deposits get discounted first. That single distinction — personal versus business — is the first fork in the road on every bank statement file.
Key Takeaways
- The expense factor is underwriter-applied, not borrower-selected — but documentation can move it.
- Personal account deposits typically count in full; business account deposits get discounted.
- Standard fixed factors run 20% for a solo service business, 40% for a business with a handful of employees, and 50% for larger staffing levels or any product-based business.
- A CPA letter or a profit-and-loss statement (capped at 80% income credit) can replace the fixed default, but the documentation has to meet a specific standard.
- Above certain loan sizes, every file — expense factor included — gets reviewed case by case before submission.
Who Actually Decides the Number?
The underwriter decides. The borrower’s accountant can influence the decision by supplying documentation, but nobody signs a form that lets a borrower pick their own factor.
Lendmire places files across a wholesale network. On a business bank statement file, the starting point almost always falls into one of three fixed brackets, based on staffing: 20% for a solo service provider with no employees, 40% for a business with one to five employees, and 50% for a business with six or more employees — or any product-based business, no matter its headcount. These brackets exist because overhead rises with staffing and inventory. They’re not arbitrary.
Sometimes a borrower’s real costs run lower than the bracket suggests. For example, a consultant with almost no overhead might land in the 40% bracket just because of a couple of part-time contractors. In cases like this, a documented override can help.
The Mechanics, Step by Step
Setting up a bank statement file follows a fixed sequence. Skipping a step is the single most common reason a file gets kicked back for rework.
1. Pull 12 or 24 consecutive months of statements. Most portfolio programs in Lendmire’s network run on 24 months of personal or business statements; a separate bank portfolio program that carries files up to $30 million on its own size ladder runs on 12 months only. Transaction histories printed from an online banking portal don’t substitute — the statements need to be the actual monthly issue.
2. Separate personal deposits from business deposits. If the borrower owns at least 25% of the business supplying the statements, business deposits are eligible for review. Below that ownership threshold, the deposits generally don’t qualify at all.
3. Strip non-recurring items before averaging. One-time asset sales, loan proceeds, and internal transfers between the borrower’s own accounts get pulled out before the monthly average is calculated. Transfers from the borrower’s own business into a personal account do count, and they count in full — that’s one of the more borrower-friendly parts of the calculation.
4. Apply the default factor for the business type. Solo service business, no employees: 20%. One to five employees: 40%. Six or more employees, or any product business: 50%. This is the number that applies unless something overrides it.
5. Submit documentation for an override, if the actual ratio is lower. A CPA letter or a profit-and-loss statement can replace the default. The P&L path is capped at 80% income credit regardless of what the statement shows — it’s a ceiling, not a blank check.
6. Prorate for ownership percentage. If the borrower owns 60% of the entity, only 60% of the already-discounted qualifying income counts, not the full deposit stream.
7. Feed the resulting number into standard underwriting. Once qualifying income is set, it runs through debt-to-income, credit review, and reserve calculations exactly the same as W-2 or tax-return income would.
Business Type Framework
| Business Profile | Typical Default Factor | Override Path |
|---|---|---|
| Solo service provider, no employees | 20% | CPA letter if overhead is genuinely lower |
| Service business, 1–5 employees | 40% | CPA letter or P&L, if documented |
| Business with 6+ employees | 50% | CPA letter or P&L (capped at 80% credit) |
| Product-based or inventory-heavy business | 50% | CPA letter or P&L (capped at 80% credit) |
| Mixed personal/business commingled account | Case-by-case; often defaults high | Requires clean account separation to improve |
The last row is where most files lose ground unnecessarily. A borrower who runs payroll and rental deposits through the same account, or who deposits personal wages into a business account, hands the underwriter a messier picture — and messier pictures default toward the higher bracket, not the lower one.
Can a CPA Letter Actually Move the Number?
Yes, but only if it’s built correctly. A CPA letter that doesn’t state the specific expense ratio, doesn’t cover the same period as the bank statements, or comes from someone who can’t be verified as licensed generally gets rejected outright rather than accepted at face value.
An usable letter needs the preparer’s full name, professional credential, license number, firm name, and contact information, and it needs to state the expense ratio in explicit terms — not a general comment about the business being profitable. It also has to cover the identical time window as the bank statements being used, not a different fiscal period. An accountant who writes a letter describing last year’s tax return doesn’t help a file built on this year’s deposits.
The decision on whether to even pursue a CPA letter comes down to the gap between the fixed default and the business’s real cost structure. If the actual expense ratio is close to or above what the fixed bracket already assumes, there’s no upside — stick with the default. If the real ratio is well below the bracket, the paperwork is usually worth the effort, because the resulting qualifying income difference can be the gap between clearing a leverage tier and not.
Business-purpose loans against a rental portfolio work differently. Instead of looking at the borrower’s operating business, lenders compare the property’s rental income to that property’s own debt. Fannie Mae explains that its comparable-rent schedule lets an appraiser document market rent for a single-family investment property. This is a completely different income test than anything found in a bank statement file. Investors sometimes mix the two up, but they don’t overlap. Lendmire’s complete DSCR loans guide explains how the property-income path works for buying or refinancing a rental, when a borrower doesn’t want personal deposits reviewed at all.
Where the Review Gets Stricter: Above $4 Million
Every loan above $4,000,000 gets reviewed case by case before it’s ever submitted — expense factor included. That’s not a soft guideline; it’s how the file gets structured from the start once a purchase or refinance crosses that line.
Above $3,500,000 on a primary residence, or $3,000,000 on a second home or investment property, additional overlays apply across the board: a 700 credit floor, clean housing history with no late payments in the prior 24 months, 48-month seasoning on any credit event, and a requirement that the borrower be a U.S. citizen or permanent resident with no non-occupant co-borrowers. Leverage steps down noticeably at this size too — a primary residence purchase in the $4 million to $5 million band typically tops out around 65%, compared with 90% available at the $300,000 to $1 million entry point. Investment property and second-home leverage runs roughly five points lower than primary-residence leverage at every comparable size band, subject to underwriting.
Above $6,000,000, files move onto a separate bank portfolio ladder that carries twelve-month-statement loans as high as $30,000,000, stepping down from 65% at the $5 million mark to 60% at $10 million and 55% at $30 million, with interest-only capped at 60% or the band’s own ceiling, whichever is lower. That ladder doesn’t run on the 24-month standard — it’s built on 12 months of statements specifically. Getting the documentation window wrong at this size is one of the more expensive mistakes a broker can make on a file this large.
Lendmire’s writeup on how a super jumbo bank statement loan reads the expense factor walks through how these size bands interact with documentation choices in more depth.
What Actually Goes Wrong
The most common failure point isn’t the math — it’s the paperwork behind an override. A borrower requests a lower ratio, the accountant sends a letter, and the letter doesn’t state a specific percentage or doesn’t cover the matching statement period. That file goes back for rework, sometimes more than once.
A second common issue is account commingling. Rental income, business revenue, and personal draws sitting in one account make it hard for an underwriter to apply any factor with confidence, and the safe move — from the underwriter’s chair — is to default toward the higher bracket rather than guess low.
A third issue shows up on files trying to use the P&L path to push qualifying income above what the 80% cap allows. The cap is firm. A P&L that implies a lower true expense ratio doesn’t get credit above that ceiling regardless of how clean the statement looks.
Non-QM loans use alternative documentation, but that doesn’t make them riskier. Average credit scores for non-QM borrowers are close to those of conventional borrowers — roughly 776 versus 781 for conventional QM borrowers. Loan-to-value ratios are also similar between the two groups. The expense factor is just part of how documentation works. It says nothing about how risky the borrower is.
Interest-Only Structures and What Happens at Reset
The portfolio program’s interest-only option goes up to 85% loan-to-value, with a 700 credit score floor. It’s a 40-year loan with a 10-year interest-only period. The bank portfolio program’s interest-only option is different: it caps at 60% loan-to-value and comes through 5- and 7-year fixed-period adjustable loans. Its 10-year fixed-period option fully amortizes instead — it’s not interest-only.
Qualifying income gets set at origination, based on a deposit average and expense factor from that point in time. So if a business’s revenue drops a lot before the rate adjusts, refinancing or requalifying later could be harder. This isn’t really a flaw in the expense-factor method. It’s more a reason to treat the interest-only period as a planning window, not a payment you can ignore. If a business’s deposits have softened by refinance time, asset-based qualification is worth a look. With this method, liquid assets are divided across 36, 60, or 84 months instead of running through deposits.
Where Cash-Out and Reserves Fit In
Cash-out proceeds are unlimited at or below 60% loan-to-value on the portfolio program, with a $1,500,000 cash-in-hand cap above that threshold; the bank portfolio program doesn’t publish a comparable cap. Reserve requirements scale with loan size — generally 3 months of reserves up to $500,000, 6 months up to $1,500,000, and 9 months above that, plus 2 additional months for each other financed property up to a 12-month maximum. First-time real estate investors are typically held to a 12-month reserve requirement regardless of loan size. None of these figures move because of the expense factor chosen — they’re independent underwriting layers that stack on top of whatever qualifying income the deposit calculation produces.
This isn’t legal or tax advice. It’s also not a promise to lend. Every file gets underwritten on its own, and program guidelines can change. A qualified mortgage professional or CPA should review a borrower’s specific documents before finalizing any override strategy.
Frequently Asked Questions
Can I just tell my loan officer what expense factor to use?
No. The factor is set by underwriting based on business type and documentation, not borrower preference. What a borrower can do is supply a CPA letter or profit-and-loss statement that gives the underwriter a documented reason to move off the fixed default.
Does the expense factor apply to my personal bank statements too?
Generally no. Personal account deposits are typically counted at or near 100%, since a personal account isn’t presumed to carry ongoing business overhead the way a business account does. The discount applies specifically to business account activity.
What if my business has multiple owners?
Qualifying income gets prorated to the borrower’s ownership percentage after the expense factor is applied. A 50% owner with a 20% expense factor sees their share of the discounted deposits counted, not the full business total.
Is there a maximum expense factor a lender can use?
The fixed brackets run 20%, 40%, or 50% depending on staffing and business type, and the profit-and-loss method caps at 80% income credit regardless of what the P&L shows. Those ceilings exist across the wholesale network Lendmire places files with, though exact treatment varies by program and is subject to full underwriting.
Why does my file get reviewed case by case above a certain loan size?
Every loan above $4,000,000 goes through case-by-case review before it’s submitted, and additional credit, seasoning, and occupancy overlays apply above $3,500,000 on a primary residence or $3,000,000 on a second home or investment property. Larger loans carry more concentrated risk, so the entire file — expense factor included — gets a closer look before it moves forward.
If you’re weighing a bank statement approach against a rental-income path for an upcoming purchase or refinance, Lendmire can help compare how the numbers run under each documentation method, based on the property, the borrower’s credit profile, leverage needs, and overall investment goals. Reach the team at 828-256-2183 or through a rate and scenario request to walk through a specific file.
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 DSCR-focused mortgage broker that helps arrange investor financing across 40 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. Fannie Mae, Appraiser Update June 2024 (Form 1007)
2. Scotsman Guide, “A decade later, non-QM loans prove a stable, crucial option”
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.
