Deposits, not returns
Bank Statement HELOC
Twelve or twenty-four months of deposits instead of tax returns, as a second lien that leaves your first mortgage alone.
A bank statement HELOC does one thing differently from a normal HELOC: it reads your deposits instead of your tax returns.
Everything else is the same. It is a second lien, your first mortgage stays where it is, you draw what you need and pay interest only on what you draw.
How the deposit math works
The underwriter adds up qualifying deposits across the statement period, applies an expense factor, and divides by the number of months.
Personal statements are usually credited at or near 100% of deposits, on the logic that money reaching your personal account has already cleared business expenses.
Business statements get an expense factor applied — commonly 50%, sometimes a fixed percentage by industry. So $400,000 of business deposits at a 50% factor credits you with $200,000 of income, or roughly $16,600 a month.
The CPA letter, which is the whole game
That 50% factor is a default, not a fact.
If your business genuinely runs at 25% expenses — a consultant, an agent, most service businesses — a letter from your CPA stating your actual expense ratio can cut the factor. At 25% instead of 50%, the same $400,000 of deposits credits you with $300,000 instead of $200,000.
That single document is often the difference between the line you wanted and half of it. Most borrowers never learn it exists, because the bank that declined them had no reason to mention it.
What gets stripped out
Underwriters remove:
- Transfers between your own accounts. Money moved from business to personal and counted twice is the most common reason a file gets cut back.
- One-off deposits — a tax refund, an asset sale, a loan to yourself.
- Large unexplained deposits, unless you can document the source.
- Negative days. A string of overdrafts will sink an otherwise strong file.
Practical advice: for the twelve months before you apply, move money once, label everything, and stop the account going negative.
What you need
- 12 or 24 months of statements, all pages, even the blank ones
- Two years in the same business, usually
- Credit in the low 600s and up
- Equity: most lenders to 80% combined loan-to-value, some to 85% or 90%
- A business license or CPA letter confirming the business exists
- A CPA letter on the expense ratio, if you want the better number
Where this sits
If your returns work after add-backs, a conventional HELOC is cheaper and you should take it. If they do not, this is usually the strongest of the no-tax-return routes because it documents the most income.
The full comparison is on the HELOC for self-employed page.
The rest of this, in detail
- HELOC for self-employed borrowers — the main guide
- HELOC without tax returns
- Bank statement HELOC
- HELOC without income verification
- Self-employed HELOC requirements
- Why self-employed HELOC applications get denied
- When a lender freezes or cuts your HELOC
- How lenders calculate self-employed income
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Taxes, insurance and the rest (edit anything)
Tax rate defaults to 1.1%. Orange County tract homes often run higher once Mello-Roos is added, which is why it has its own box.
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Illustration only, based on the figures you entered, including a rate you chose. Not a loan offer, a quote, or a commitment to lend. Principal and interest only; taxes, insurance and mortgage insurance are not included. Actual available credit depends on a full review of value, credit, income, occupancy, lien position and program guidelines. Equal Housing Lender.
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Questions people ask
How many months of statements do I need?
Twelve or twenty-four. Twenty-four usually prices better because it shows more history. Twelve is available and costs a little more.
Business or personal statements?
Either, and it changes the math. Personal accounts are usually counted at or near 100% of deposits. Business accounts get an expense factor applied, commonly 50%.
How do I raise my qualifying income?
A CPA letter stating your actual business expense ratio. If your real expenses are 25% and the lender's default factor is 50%, that letter can nearly double the income they credit you with.
Do transfers between my accounts count?
No. Underwriters strip them out, and a file full of untraceable transfers takes longer and sometimes fails. Move money once and label it.
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