Personal vs Business Statements, Eligible Deposits, Transfers, and Seasonality

Bank statement loans exist for one reason: traditional tax returns often understate real income for self-employed borrowers. Business owners write off expenses aggressively, which is smart for taxes but creates friction when qualifying for a mortgage.

Instead of relying on tax returns, bank statement loans use actual deposits to estimate income. That sounds simple, but the details matter. This article explains how lenders calculate bank statement income, what counts, what does not, and where borrowers usually get tripped up.

The core concept lenders use

At its most basic level, bank statement income is calculated like this:

1. Add up eligible deposits over a defined period

2. Divide by the number of months to get an average

3. Apply an expense factor to estimate net income

That estimated net income is what lenders use for debt-to-income calculations.

The nuance is in which statements are used, which deposits qualify, and what expense factor applies.

Personal bank statements vs business bank statements

Personal bank statements

Personal statements are sometimes allowed when income flows directly into a personal account. This is common for sole proprietors, independent contractors, and gig workers.

What lenders look for:

• Consistent deposits tied to earned income

• A clear connection between the borrower and the source of income

• Minimal unexplained or one-off deposits

Personal statements are often simpler, but lenders scrutinize deposits closely because there is less separation between business and personal activity.

Business bank statements

Business statements are more common for LLCs, S-corps, and corporations.

Key rules most lenders follow:

• The borrower must usually own at least 25 percent of the business

• Deposits are treated as gross revenue, not net income

• An expense factor is applied to approximate operating costs

Business statements are powerful, but they almost always require a conservative expense factor unless documentation supports otherwise.

What deposits typically count as income

Eligible deposits usually include:

• Client or customer payments

• Contract income

• Recurring business revenue

• Commission income

• Invoices paid into the account

The common theme is earned, recurring income tied to the borrower’s work or business.

Lenders are looking for a pattern, not perfection. Small fluctuations are normal. Large unexplained spikes are not.

Deposits that usually do not count

Some deposits look like income but are not usable for qualification. These commonly get excluded:

• Transfers between accounts you control

• Moving money from savings to checking

• Owner contributions

• Loan proceeds

• Cash advances

• Gifts

• One-time asset sales

If a deposit does not represent new earned revenue, it usually gets backed out.

This is why transfers between personal and business accounts almost never help qualification, even if the total deposits look large.

How transfers are treated

Transfers are one of the most misunderstood parts of bank statement loans.

General rule:
Transfers do not create income. They only move money.

If a lender sees:

• Business account → personal account

• Personal account → business account

• Checking → savings → checking

Those deposits are typically excluded to avoid double counting.

If you rely heavily on transfers, expect lenders to strip those out before calculating averages.

12 months vs 24 months of bank statements

Most programs allow either 12 or 24 months. The choice matters.

12 months

• Higher risk for the lender

• Often requires stronger credit or higher rates

• Can work well if income is trending upward

24 months

• Smoother average

• Better for seasonal or variable income

• Often results in more stable qualifying income

If income fluctuates significantly, 24 months usually helps. If income recently increased, 12 months may be advantageous.

Seasonality and variable income

Seasonal income is allowed, but lenders want to see consistency across cycles.

Examples:

• Construction

• Tourism

• Consulting

• Commission-based sales

What matters is not that income is the same every month, but that the pattern makes sense over time. A strong summer and weak winter can be acceptable if the overall average supports the loan.

This is where borrowers benefit from using a calculator that averages deposits realistically instead of guessing.

Expense factors and why they matter

After averaging deposits, lenders apply an expense factor to estimate net income.

Common ranges:

• 50 percent is the most common default

• Some programs allow as low as 25 percent

• Higher expense factors reduce qualifying income

If an expense factor below 50 percent is used, lenders may require:

• CPA letter

• Profit and loss statement

• Additional documentation

Lower expense factors are possible, but they increase scrutiny.

Why details matter more than people expect

Two borrowers with the same deposits can qualify for very different amounts depending on:

• Statement type used

• Deposit consistency

• Transfers

• Expense factor

• Existing debts

• Housing costs like HOA and insurance

This is why generic rules of thumb fail and why most online calculators are misleading.

How to check your numbers

Before applying, you should know:

• Your average monthly eligible deposits

• Whether personal or business statements make more sense

• A realistic expense factor

• Your pre-housing debt obligations

Using a bank statement calculator that lets you model these inputs is the fastest way to avoid surprises.

If you want a second set of eyes on your estimate, run the numbers, copy the link, and send it over. A quick review can save weeks of frustration later.

For more information on our bank statement loan programs: Forward Capital Bank Statement Loan Programs

Disclaimer:
This article is for educational purposes only. Bank statement loan guidelines vary by lender, program, and borrower profile. All loans are subject to underwriting approval.