Bank statement home equity loan: your deposits are your income

A bank statement home equity loan is a fixed-rate second mortgage for self-employed homeowners, qualified on twelve months of business bank deposits instead of tax returns. We add up the deposits, count half as income to allow for business expenses, and underwrite the loan on that number. No tax returns. Your first mortgage stays exactly where it is. If you run a business, write off everything you legally can, and have been told by a bank that you "don't make enough" while your account balance says otherwise, this is the home equity loan for self employed owners that was designed for you.

Who this is for

Contractors. Real estate agents. Consultants. Truck owner-operators. Salon owners. Anyone paid on a 1099 who deducts a vehicle, a home office, equipment, mileage and a retirement contribution before the bottom line of Schedule C is calculated. Also partners in an S corp or LLC who take a modest salary and leave the rest in the business.

Here is why a full-doc lender says no to people who are clearly solvent. A conventional home equity loan or HELOC uses your tax returns to set income, and for a self-employed person that means net profit after every deduction. A contractor who deposited $480,000 last year and wrote off $330,000 in materials, subs, trucks and tools looks like a $150,000 earner on paper, or less after depreciation. Nothing about his ability to pay changed. Only the way income was measured did. A bank statement loan measures it the way your bank already does.

How the math works

Three steps. Add up twelve months of business deposits. Divide by twelve for a monthly average. Count half of that as income. That result is what the underwriter uses. Counting half exists to account for the expenses your business pays out of those deposits, and an underwriter may adjust it for some business types based on what the business actually costs to run.

Plug your own deposits into the tool above and it does the division for you. It is an estimate, not an approval, and the final numbers come from the underwriter's review of your actual statements.

What we need from you

The list is shorter than a full-doc file.

• Twelve consecutive months of business bank statements, all pages, from the account where your revenue lands. Two business accounts, we take both.
• Proof you own the business. A business license, a CPA letter, articles of organization, or a K-1.
• Equity and credit. The loan has to fit behind your first mortgage. Most lenders cap total loans at a share of the home's value, and every lender sets its own limits; we match you to the one that fits.
• A short description of the business. What you do and how long you have done it.

The fastest way to know is a five-minute call: (916) 755-6080, or run the calculator and hit See your options.

What counts as a deposit

Revenue. Customer payments, client wires, Square or Stripe deposits, checks, cash. Transfers between your own accounts count once, not twice. Loan proceeds, a tax refund, or a one-time sale of equipment are generally backed out. A single deposit far larger than your normal pattern will get a question, and a plausible answer with a paper trail usually resolves it. If you run business and personal money through one account it can still work, but the cleaner the account, the smoother the review. Call us and let us look at the statements before you decide this is the right program.

The loan itself

This is a closed-end home equity loan. One lump sum at funding, a fixed rate for the life of the loan, and a payment that amortizes to zero over a set term. It records as a second lien behind your first mortgage, and that first mortgage does not change. If you locked a low rate on it years ago, you keep it. The full mechanics are on how a home equity loan works.

The amount you can borrow is the smaller of two numbers: what your qualifying income supports, and what your equity allows. Run the equity calculator first so you know which of the two is your limit.

If you would rather have a line you can draw on and pay down repeatedly, read how a HELOC works and then call us. Bank statement HELOCs are rare in the wholesale market and the fixed-rate loan is the realistic answer for most self-employed borrowers right now.

Bank statement loan vs full-doc vs cash-out refi for a self-employed borrower

Three ways a self-employed homeowner can get at equity. The right one depends on how your tax return reads, what rate your first mortgage carries, and how much you need.

A full comparison of all three structures, independent of how you document income, is on HELOC vs home equity loan vs cash-out refinance. The short version for self-employed people: if your returns qualify you, full-doc is usually cheaper. If they do not, a bank statement second gets you the money without touching a first mortgage you like. A cash-out refinance only makes sense if your first-mortgage rate is already near today's rates.

Why this is hard to find

Walk into a retail bank or a credit union and ask for a home equity loan without tax returns and you will usually get a polite no. The lenders that do offer bank statement second mortgages are mostly national wholesale shops that do not have branches and do not advertise to consumers. They reach borrowers only through mortgage brokers who are approved with them. The product exists and is well established; you just cannot get it by searching for a lender's website.

Unified Home Loans brokers to these wholesale lenders and also lends directly as a correspondent. If your deposits are strong, we place the file with the bank statement program. If your tax returns actually do qualify you, we can move the same file to a full-doc program, possibly at better pricing, without starting over. If neither fits, we will tell you plainly and talk about other ways to reach equity without refinancing.

Getting it done

1. Run your number. Use the bank statement calculator above with your real deposit total, then the equity calculator on the home page.
2. Send twelve months of statements. Download them from your business bank's website as PDFs, all pages, and send them through our secure upload link. We review them and tell you what will likely count before you commit to anything.
3. Application and credit. A standard application, a credit pull, your business ownership document, and your current first-mortgage statement. Then an appraisal or a lighter valuation if the program allows one.
4. Underwriting. The underwriter reviews deposits, verifies ownership and equity, and issues conditions. We handle the back-and-forth.
5. Close and fund. You sign a fixed-rate second mortgage. On a primary residence you have a three-business-day right to cancel, and funds arrive after that window closes. Your first mortgage keeps its rate, its servicer and its payment.