If your tax returns show less income than you actually earn, a bank statement loan for self employed buyers lets a broker qualify you on your deposits instead of your net taxable income. It is a Non-QM mortgage, fully documented, but documented through your bank activity rather than your Schedule C. For a Church Hill buyer whose write-offs are legitimate and large, that can be the difference between a denial and a closing.
Duane Buziak walks through how the math works, where the trade-offs sit, and what a purchase near Libby Hill or along East Broad might look like.
By Duane Buziak, NMLS #1110647
Why Church Hill Self-Employed Buyers Hit a Wall With Tax Returns
Imagine a freelance photographer who rents a studio near 25th Street, or a contractor who restores older Church Hill rowhouses. Her deposits run strong all year. But she deducts equipment, mileage, software, a home office and a vehicle, which is exactly what a good accountant should do. Her tax return shows a fraction of what hit her account, and a conventional loan only sees the return.
Conventional underwriting typically averages two years of net income after deductions. That net figure becomes your qualifying income, and your proposed housing payment plus monthly debts is divided by it to produce your debt-to-income (DTI) ratio. Every legitimate business expense lowers the denominator. A buyer who earns well can still land at a DTI that no conventional program will accept.
A bank statement loan is a Non-QM product built for that gap. Non-QM means the loan does not follow the standard Qualified Mortgage box, but it is still underwritten under the federal ability-to-repay rule. The CFPB’s explanation of qualified mortgages covers the baseline rule. Instead of tax returns, the underwriter uses 12 or 24 months of deposits to calculate income.
Church Hill makes this scenario common. The housing stock is largely brick rowhouses and older homes, many inside historic districts, and the neighborhood draws creatives, restaurant owners and tradespeople. Pricing has moved a lot in recent years, so check the current Church Hill figure on Zillow’s home value data or the Virginia REALTORS market reports before you set a budget. Numbers change monthly, and your price band determines your loan size.
How Bank Statement Income Is Calculated
The process is mechanical, and knowing it helps you prepare. Programs differ, so confirm current guidelines before you rely on any detail here.
- Choose the statement type and period. Underwriters review 12 or 24 months of either personal or business statements. A longer window can smooth out a lumpy year, but it also pulls in any weak months.
- Total the qualifying deposits. Only deposits that represent real business or personal earnings count.
- Remove what is not income. Transfers between your own accounts, loan proceeds, refunds, and one-off deposits such as a gift or a car sale come out.
- Apply an adjustment. With business statements, underwriters usually apply an expense factor, either a flat percentage of deposits or a figure from a CPA-prepared profit and loss statement. Personal statements typically involve less adjustment because the money is already in your own account.
- Divide by the number of months. The result is your monthly qualifying income.
The expense factor is the term people misunderstand. It is the share of your deposits assumed to go toward running the business. Factors vary by program and by industry, and a CPA-supported figure can sometimes differ from a flat default. Ask for the factor in writing before you compare programs.
The most common stumbling block is a commingled account. If personal groceries, a tax refund and client payments all run through one checking account, the underwriter has to sort them out, and anything unexplained gets excluded. Large deposits with no paper trail are treated the same way.
Typical documents include:
- The full set of statements for the chosen period, every page
- A business license or a CPA letter confirming how long you have been self-employed
- Government-issued ID
- Sourcing for your down payment and reserves
One misconception worth correcting: this is not a no-documentation loan. It is a documented loan, just through a different set of records. For a fuller checklist, see our guide to the documents needed for a mortgage application.
Bank Statement Loan vs. Conventional vs. Other Non-QM Options
Self-employed buyers have more than one path, and bank statement financing is not automatically the right one. Conventional loans carry the best pricing when your tax returns support the income. FHA allows lower credit scores and down payments but still uses tax-return income for self-employed borrowers. VA loans are a strong option for eligible veterans and service members, and Duane Buziak can work with VA scores down to 500 FICO, subject to program review. The VA home loan page explains eligibility. If your tax-return income works for any of these, use them first.
Bank statement financing makes sense when write-offs, not weak earnings, are what hold you back. Be clear about the costs. As of October 2026, Non-QM pricing is typically higher than conventional, down payment and reserve requirements are often larger, and some programs carry prepayment terms. Rates move daily, so check current pricing rather than relying on anything printed in an article.
Related Non-QM tools
Two siblings are worth knowing. A DSCR loan qualifies an investor on a rental’s projected income against its payment, with no personal income review, which suits someone buying a Church Hill rowhouse to rent (see our overview of Richmond investment property loans). A Bank Statement HELOC lets an existing owner who is self-employed tap equity using deposits to document income.
Side-by-side comparison
Here is how a typical single-source online mortgage company compares with Duane Buziak, who works as an independent broker.
- Income documentation. Single-source online company: usually tax returns and W-2s, with limited alternatives. Duane Buziak: tax returns, or 12 or 24 months of personal or business statements.
- Non-QM availability. Single-source online company: often not offered or limited to a narrow menu. Duane Buziak: bank statement, DSCR and related Non-QM programs.
- VA to 500 FICO. Single-source online company: usually a higher internal minimum score. Duane Buziak: available, subject to program review.
- DSCR and bank statement options. Single-source online company: typically not part of the lineup. Duane Buziak: both available, plus a Bank Statement HELOC for existing owners.
- Broker independence. Single-source online company: one set of its own products and pricing. Duane Buziak: hundreds of loan sources compared at once to find the best fit.
Worked Example: Self-Employed Buyer Purchasing in Church Hill
This is an illustration, not a quote or an approval. Every number is an assumption, and the price is a round figure chosen to keep the math readable. Compare it to current Church Hill sales on Zillow or Virginia REALTORS before using it as a benchmark.
The purchase. Suppose a restaurant owner buys a rowhouse for $450,000 with 20% down ($90,000). The loan is $360,000, well under the 2026 conforming limit of $832,750 set by FHFA, though a bank statement loan is a Non-QM product regardless of size. Assume a 7.25% rate for the example only.
The payment.
- Principal and interest: about $2,456 per month
- Real estate taxes: Richmond has charged roughly $1.20 per $100 of assessed value in recent years, so confirm the current rate on the City of Richmond real estate tax page. At $450,000 assessed, that is about $5,400 per year, or $450 per month
- Homeowners insurance: assume $150 per month
- Total housing payment: about $3,056 per month
Add $600 per month in a car payment and credit cards, and total monthly obligations are $3,656.
Income on the tax return. After deductions, the buyer’s net business income is $54,000 per year, or $4,500 per month. DTI is $3,656 divided by $4,500, about 81%. No conventional program will approve that.
Income on bank statements. Twelve months of qualifying business deposits total $168,000. Applying an example 40% expense factor leaves $100,800, or $8,400 per month. DTI is $3,656 divided by $8,400, about 43.5%, which falls in a range many programs can consider.
The buyer, the business and the house are identical in both cases. Only the income measurement changed. Actual factors, DTI caps and rates depend on the program, so treat this as a map of the method rather than a forecast. For a second real-world walkthrough, see this bank statement loan example.
Credit, Down Payment, and Reserves: What Duane Buziak Looks For
Credit score minimums, down payments and reserve requirements vary by program, and they shift with market conditions. In general terms, Non-QM programs expect stronger credit than FHA or VA, down payments often start in the 10% to 20% range, and pricing improves as your credit and equity increase. Confirm the current requirements for the specific program before you plan around any number. If your score needs work first, these steps for improving your credit score before a mortgage application can help.
Duane Buziak shops hundreds of loan sources at once through the platform, which matters here because Non-QM guidelines differ widely from one source to the next. One may accept 12 months of statements and another may require 24, and expense factors and score cutoffs vary as well. Finding the best fit is a comparison exercise, not a guess.
That comparison starts with NoTouch Credit Pull. It is a soft credit pull mortgage review, so checking your options does not lower your score. The platform also accommodates Vantage Score 4.0. How each program uses a given scoring model should be verified for that program before anyone promises you a result.
Reserves are the liquid funds you hold after closing, usually expressed as months of housing payments. Non-QM programs commonly ask for more of them than conventional loans, because the income is verified indirectly.
Time in business is often two years, though some programs make exceptions when you worked in the same field before going out on your own. Verify the current rule. Seasonal income, like a caterer or an outdoor contractor, usually favors the 24-month window because it captures full cycles. A newer business has fewer options, but not zero, so it is worth a conversation rather than an assumption. Gig and freelance earners face a similar path, which we cover in our guide to a mortgage for gig economy workers.
Steps to Get Started and Common Mistakes to Avoid
- Gather 12 to 24 months of complete statements, personal and business.
- Separate personal and business funds going forward, and note any unusual deposits with documentation.
- Run a no hard inquiry mortgage pre approval so you see your options without touching your credit.
- Compare programs on rate, down payment, reserves, expense factor and prepayment terms, then choose.
- Lock your rate when the numbers and the contract timeline line up.
Mistakes that cost buyers the most:
- Moving money between accounts just before applying, which creates transfers that must be explained and sometimes excluded
- Depositing large amounts of cash with no paper trail
- Deleting or hiding business expenses on statements, which can distort the picture and raise questions
For the broader process, our step-by-step guide to getting a self-employed mortgage in Richmond, VA covers the full path from preparation to closing.
Frequently asked questions
How many months of bank statements do I need? Most programs ask for either 12 or 24 months, and some offer both options, so the right choice depends on whether your recent year or your two-year average looks stronger.
Does it hurt my credit to check my options? No, because Duane Buziak uses NoTouch Credit Pull for the initial review, which avoids a hard inquiry. A hard pull may come later once you move forward with a specific program.
Are bank statement loan rates higher than conventional? Typically yes. As of October 2026, Non-QM pricing generally runs above conventional, so request a current comparison instead of assuming.
Can I use a bank statement loan for an investment property? Often yes, depending on the program. Investors may also look at a DSCR loan, which qualifies the property’s rental income instead of yours.
Can I refinance or take cash out with bank statements? Yes, many programs support refinances and cash-out, and existing owners can also consider a Bank Statement HELOC. Limits depend on your equity and the program.
Do I need a CPA letter? Not always. Some programs accept a business license or other third-party proof of time in business, while a CPA letter is required or helpful for others, especially when an expense factor is based on a profit and loss statement.
Can a new business qualify? Sometimes. Many programs want two years in business, but exceptions can apply if you have prior experience in the same field, so ask rather than assume.
Is this available for Henrico or Chesterfield buyers too? Yes. Duane Buziak works with buyers across Church Hill, Henrico, Chesterfield and the wider Richmond area, and program availability is the same as long as the property qualifies.
Your Deposits, Not Your Write-Offs, Can Set Your Buying Power
The business expenses that lower your tax bill do not have to lower your home budget. If your deposits tell a stronger story than your return, a bank statement loan lets that story count, with the honest trade-offs of higher pricing and more reserves.
Ready to secure your dream home with Richmond’s most trusted mortgage expert? Get your personalized rate comparison today with no credit impact and discover why hundreds of local families choose Duane Buziak for stress-free mortgage solutions backed by 24/7 support and the fastest close times in the area. You can also call Duane Buziak at Richmond Mortgages by Duane Buziak at 804-212-8663 for a no credit hit mortgage application review.