Bank Statement Loans for Self-Employed Borrowers in Texas

Why self-employed borrowers get stuck

Conventional and FHA loans qualify you on taxable income — the bottom line of your tax return after write-offs. For many business owners, contractors and freelancers, that number is far lower than what the business actually brings in. The result is a declined application or a much smaller approval than you can afford.

Bank statement loans solve that by calculating income from the deposits in your personal or business bank accounts instead of your tax returns.

How lenders calculate your income

• Statement period: usually your most recent 12 or 24 months of bank statements.
• Personal accounts: lenders generally average qualifying deposits, excluding transfers between your own accounts and one-time deposits that aren't income.
• Business accounts: lenders apply an expense factor to deposits to estimate your profit. That may be a set percentage, or a figure based on a CPA or tax preparer's letter or a profit-and-loss statement — a lower documented expense ratio can mean higher qualifying income.
• Large or unusual deposits usually need a short written explanation and sometimes documentation.

Typical requirements

Every lender sets its own guidelines, so these are typical ranges, not promises:

• About two years of self-employment, verified by a business license, CPA letter or similar.
• Down payment commonly starting around 10%, with better pricing at 20% or more.
• Credit scores from the low-to-mid 600s, with better pricing higher up.
• Cash reserves after closing.
• Rates higher than conventional loans — the trade-off for flexible documentation.

Texas considerations

• Property taxes: Texas has no state income tax, but property taxes are high and vary by county, city and school district. They count in your monthly payment and your debt-to-income ratio, so use the actual rate for the address.
• Cash-out on your homestead: a bank statement loan doesn't change Texas home equity rules. A cash-out refinance on a Texas homestead is generally limited to 80% of the home's value across all liens and has its own notice and fee rules. Our Texas mortgage guide explains them.
• Investment property: if you're buying a rental, a DSCR loan that qualifies on rent may be simpler than documenting personal income at all.

How to prepare your bank statements

• Keep business and personal money in separate accounts where possible — it makes the income calculation cleaner.
• Avoid large cash deposits you can't document in the months before you apply.
• Watch for overdrafts and returned items; several of them can hurt your file.
• Download complete statements (every page) for every month requested.
• Ask your CPA or tax preparer whether they can provide a letter confirming your self-employment and, if useful, your business expense ratio.

Other options worth comparing

Depending on your situation, a 1099-income loan, a profit-and-loss-only loan or an asset-depletion loan may fit better. We compare these side by side, along with conventional and FHA, so you can see which costs least for your numbers.

Common questions