Key Takeaways
- A 12-month bank statement loan uses your most recent year of eligible deposits. A 24-month loan averages two years.
- If your business has grown, the 12-month average may show more income. If deposits have been fairly steady, 24 months can show a stronger track record.
- In the example below, 12 months supports about $601,000 in loan principal, compared with $469,000 using 24 months. These are illustrative, income-based figures, not loan offers.
- Your business expense factor can change the result more than the statement period. In the same example, a documented 30% factor raises the 12-month estimate to about $970,000.
- Ask a loan officer to calculate both the 12- and 24-month options. The better fit also depends on the rate, down payment, lender rules, and whether your income is likely to continue.
Which is better: a 12-month or 24-month bank statement loan? Start with the option that reflects your reliable current income. 12 months often helps when deposits have increased. 24 months can help when your business is seasonal or your latest year was slower, although a lender may question a decline. Run your numbers before choosing.
How bank statement loans calculate income
A bank statement loan lets a self-employed borrower document income with bank deposits instead of relying on tax returns for the income verification. Lenders review an eligible period of statements, remove deposits that do not count as business revenue, and average the rest by month.
For bank statements from business accounts, lenders generally deduct an expense factor to account for business operating costs. At a 50% expense factor, $20,000 in eligible monthly deposits reduces to $10,000 in qualifying monthly income. A lender may use a different expense factor based on your business and any supporting documents, such as a CPA letter that verifies a lower expense factor.
The bank statement review period decides how many months go into the average. The expense factor determines how much of those deposits counts as income. Both can affect your borrowing power.
Compare 12 vs. 24-month bank statement loan programs
| Feature | 24-month program | 12-month program |
|---|---|---|
| Deposit history reviewed | Most recent 24 months | Most recent 12 months |
| May suit | Steady or seasonal income; a recent dip that needs context | A business with sustained recent growth |
| Availability | Common among specialist lenders | Common among specialist lenders |
| Pricing | Varies by lender and borrower | Can match 24-month pricing at the same lender |
| Published loan-to-value information | Some lenders advertise up to 90% for eligible loans | Some lenders advertise up to 90% for eligible loans |
The 90% loan-to-value figure is a lender-specific maximum, not a promise that every borrower can put 10% down. Your credit, property, loan purpose, loan size, and reserves can change the limit. Defy Mortgage publishes 12- and 24-month bank statement options under the same pricing and LTV rules.
How do you decide which bank statement review period to use?
As a starting point, Mbanc suggests comparing two years of your deposits. Ideally, they are within roughly 15% to 20% of each other. 24 months can add a useful record of consistency. However, if your latest year of deposits is much stronger, a 12-month average may do more for your qualifying income. That’s a general guideline, not a firm requirement for approval.
What each statement period could qualify for
Suppose a business averaged $20,000 in eligible deposits per month in the second-to-last year, $28,000 per month in the latest year, and $34,000 per month in the last three months. For this illustration, assume a 50% expense factor, a maximum debt-to-income ratio of 45%, $1,500 in other monthly debt payments, and $700 per month for property taxes and insurance.
The example uses a 30-year loan at 7.25% for the 12- and 24-month calculations. This rate is hypothetical.
| Statements used | Average monthly deposits | Qualifying monthly income | Maximum monthly housing payment | Approximate loan principal supported by income |
|---|---|---|---|---|
| 24 months | $24,000 | $12,000 | $3,900 | $469,000 |
| 12 months | $28,000 | $14,000 | $4,800 | $601,000 |
The 12-month calculation supports a loan principal about $132,000 more than the 24-month calculation at the same illustrative rate.
A shorter statement period can also work against you if your income has declined. When the latest year’s average deposits are lower than the 24-month average, the 12-month calculation may support a smaller loan. Comparing both periods can help you see which gives you more qualifying income.
The figures above show what the income calculation might support. Your actual loan amount could be lower because of the property’s value, the lender’s maximum loan-to-value ratio, your down payment, and other requirements. See our bank statement loan down payment guide to see how much you may need to put down.
The expense factor may make a bigger difference
Changing the bank statement review period is only one way to improve the income calculation. If your business costs less to run than the lender’s standard assumption, ask what evidence it accepts for a lower expense factor. Here is the same 12-month example at three factors:
| Expense factor on 12-month file | Qualifying monthly income | Approximate loan principal supported by income |
|---|---|---|
| 50% | $14,000 | $601,000 |
| 40% | $16,800 | $786,000 |
| 30% | $19,600 | $970,000 |
Moving from a 50% to a 30% expense factor adds about $369,000 to the illustrative loan amount. Even a 24-month calculation with a 30% factor would support about $786,000 in this example, more than the 12-month calculation at 50%.
The lender decides what expense factor applies for business accounts and what proof it needs. A CPA letter, a third-party prepared profit-and-loss statement, or a business questionnaire may help, depending on the program. LendSure says its factors can be as low as 10% for some low-overhead businesses. That is a program possibility, not the factor you should assume for your own loan. Learn more in the bank statement loan requirements guide.
What if your income has gone down?
Now reverse the trend. Say deposits averaged $30,000 per month in the older year and $22,000 in the latest year. With the same 50% factor and other assumptions, the 24-month average produces $13,000 in qualifying monthly income and supports about $535,000. Using only the latest 12 months produces $11,000 in income and supports about $403,000.
The longer average looks better on paper. A lender will still review the decline and may ask whether the lower income is likely to continue. If a temporary event caused the drop, prepare a clear explanation and documents that show what has changed. Ask how that lender treats falling deposits before counting on the larger 24-month figure.
Which bank deposits count?
Not every credit to your account is income. Lenders commonly remove items such as:
- Transfers between your own accounts
- Refunds, chargebacks, and returned payments
- Loan proceeds or draws from a credit line
- One-time deposits unrelated to ordinary business revenue
A lender may ask you to explain a large or unusual deposit with an invoice, contract, or other record. Review your statements before applying so you can separate customer payments from money that simply moved between accounts. That gives you a more useful estimate of your eligible deposits.
Could waiting to apply help?
New revenue only affects the months in the statement period. Imagine a new client who pays your business $100,000 a year in equal monthly amounts. If the client began paying four months ago, roughly $33,333 of those payments appears in a 12-month review. After a full 12 months of payments, the review can include the entire $100,000, assuming the deposits qualify.
If you have recently added a major client or contract, compare your numbers now with what they could look like after several more months of deposits. Your timeline and the lender’s rules still matter. See how many months of bank statements you may need for other loan scenarios.
Questions to ask lenders before deciding a bank statement review period
- Can you calculate my qualifying income using both 12 and 24 months of statements?
- What expense factor applies to my business, and what would you need to use a lower one?
- Which deposits will you leave out or ask me to document?
- Would the rate, fees, down payment, or LTV limit change between the two options?
- If deposits have declined, which income figure will you use and why?
Ask lenders to calculate your numbers on all available bank statement review periods and their corresponding loan terms. A larger income figure is useful only if the full loan offer works for your budget.
Next step:
- Gather your last 24 months of bank statements and enter your eligible deposits into our bank statement income calculator. You’ll see estimated qualifying monthly income using 12 and 24 months, and how a different expense factor changes the results.
- Then ask a loan officer which calculation the lender can use and what terms you may qualify for.
Calculate your qualifying income
Frequently Asked Questions
What is the difference between a 12-month and 24-month bank statement loan?
A 12-month bank statement loan averages eligible deposits from your most recent year. A 24-month loan uses two years. Twelve months can show recent growth more clearly; 24 months gives the lender a longer income history and can smooth out seasonal swings.
Is a 12-month bank statement loan easier to qualify for?
Not automatically. It asks for fewer statements, but the lender still checks your income, credit, down payment, and other requirements. Compare both income calculations to see which helps your application.
Can a lender calculate both 12 and 24 months and use the better result?
Some lenders evaluate both periods. Ask your loan officer to show the qualifying income and loan terms under each option. The lender must still accept the income trend and the program you choose.
Do 12-month and 24-month bank statement loans have different rates?
They can, depending on the lender. Some publish the same pricing for both periods, but your credit, loan-to-value ratio, loan type, and other details also affect the offer. Compare your specific quotes and read the bank statement loan rates guide.
Which lenders offer 12- and 24-month bank statement loans?
Several non-QM lenders offer both. Their income methods, expense factors, and property rules may differ, so compare more than the number of statements required. Start with the bank statement loan lenders guide.
Can I get a lower business expense factor?
Possibly. If your actual operating costs are below the lender’s standard factor, ask what documentation could support a lower one. In our example, a 30% factor instead of 50% raises the income-based loan estimate from about $601,000 to $970,000. Weigh that benefit against the paperwork and the broader pros and cons of bank statement loans.