Guides / Income
Bank Statement Income Calculator: How the Math Actually Works
Oct 16, 2026 · Varaxon Technologies LLC d/b/a StatementReady
This guide walks through that calculation and shows where lenders differ. It's educational, not underwriting guidance. Always follow the current guidelines for the program you're submitting to.
Bank-statement loans let self-employed borrowers qualify on deposits instead of tax returns. Every non-QM lender has its own rules. The core calculation is close to the same everywhere, though, and once you know it you can sanity-check any lender's worksheet.
The basic formula
Personal bank statements
Eligible deposits ÷ 12 or 24 months = monthly qualifying income
Business bank statements
(Eligible deposits × ownership %) × (1 − expense factor) ÷ 12 or 24 months = monthly qualifying income
Arch Mortgage Funding's public Bank Statement Income Calculator spells out the business version with a standard 50% expense factor: "(Eligible deposits × ownership %) × 50% ÷ 12 or 24 months = Qualifying income." [1]
Step 1: Total the deposits, month by month
Lender worksheets are usually laid out as one row per statement month. Arch's calculator, for example, has these columns:
- Statement Date
- Total Deposits
- # of NSF Items
- Excluded Deposits
It has separate tabs for personal and business statements and room for more than one account. [1]
Step 2: Back out ineligible deposits
Not every deposit counts. One published bank-statement program lists these "Unacceptable Deposits" [3]:
- Cash advances from credit cards
- Income sources already taken into account
- Non-business-related account transfers
- Tax refunds
- Product returns and credits
- Gift funds
- Credit line deposits and business financing
- PPP loans
Transfers between the borrower's own accounts are the classic trap. They inflate deposits if you count them twice.
Step 3: Apply ownership % (business statements)
If the borrower owns 60% of the business, only 60% of eligible business deposits count. Lenders set a minimum ownership share, and the minimums vary:
- Arch's Non-QM program requires at least 25% self-employed business ownership. [2]
- One other program sheet requires 25% for personal statements and 50% for business statements. [3]
Step 4: Apply the expense factor (business statements)
Business deposits aren't profit, so lenders apply an expense factor:
- Angel Oak: a default expense factor of 50%. A lower factor requires a statement from a third-party CPA, tax preparer or bookkeeping company, and some industries with traditionally higher expenses are underwritten at 70%. [4]
- Arch: a standard 50% option, or a custom expense factor (minimum 10%) supported by a qualifying CPA or licensed tax preparer statement. [1]
Step 5: Average, then check the trend
Divide by 12 or 24. Many lenders then compare a shorter recent window against the full period.
Arch's instructions say that with 12 months of statements, the underwriter reviews both the 12-month figure and the most recent 6 months and uses the lower of the two. With 24 months, they compare the 24-month figure with the most recent 12. [1] The same instructions require extra review when income has declined by more than 20%. [1]
Worked example (illustrative numbers)
A borrower owns 60% of a business. They submit 12 months of business statements with $300,000 in total deposits, of which $20,000 are transfers between their own accounts and refunds.
| Step | Calculation | Result |
|---|---|---|
| Eligible deposits | $300,000 − $20,000 | $280,000 |
| × Ownership | × 60% | $168,000 |
| × (1 − 50% expense factor) | × 50% | $84,000 |
| ÷ 12 months | $7,000 / month |
Then repeat the calculation on the most recent 6 months, if the lender requires it, and use the lower result.
Where errors creep in
- Typing totals by hand from 12–24 PDFs, often across several accounts.
- Missing months in a combined PDF.
- Counting internal transfers as income.
- Using the wrong expense factor or ownership % for the program.
- Skipping the recent-period trend check.
Sources (checked 2026-10-15)
- Arch Mortgage Funding, Bank Statement Income Calculator (XLSX, © 2026), linked from https://mortgage.archgroup.com/arch-mortgage-funding/calculators/ (file: https://mortgage.archgroup.com/wp-content/uploads/sites/4/MCUS-1531AMF-23J-AMF-Bank-Statement-Income-Calculator.xlsx)
- Arch Mortgage Funding, Non-QM program quick reference (PDF): https://mortgage.archgroup.com/wp-content/uploads/sites/4/MCUS-B1531AMF-26A-Non-QM-Program-QR.pdf
- Bank Statement product sheet (© 2025 Silver Hill Capital), hosted at https://www.lakeviewcorrespondent.com/wp-content/uploads/2025/07/Bank-Statement-.pdf
- Angel Oak Mortgage Solutions, Bank Statement Loan program page: https://angeloakms.com/programs/bank-statement-mortgage-program/
Guidelines change often. The details above reflect these documents as published on the date checked; check the current guide before relying on them.
© Varaxon Technologies LLC d/b/a StatementReady. Lender and program names are trademarks of their owners. StatementReady isn't affiliated with any lender named here. Navy Federal is a trademark of its owner; StatementReady isn't affiliated with or endorsed by it. Privacy Policy · Terms