What you usually hear, and the honest answer

Most self employed people we talk to have heard the basic pitch for a bank statement loan. The lender looks at your deposits instead of the bottom line on your tax return. What almost nobody explains up front is the step in the middle, where the lender decides how much of those deposits was really yours to keep. That step is the expense factor, and it can swing your qualifying income by thousands of dollars a month.

If you have ever run an online bank statement calculator and then been quoted a much smaller loan, this is almost always why. The calculator assumed one factor; the file got another. Neither one is wrong. They just answer the question differently, and you deserve to know which question is being asked about your business.

How the expense factor turns deposits into income

The math itself is simple. The lender totals your eligible business deposits over a set number of months, confirmed per file, and divides by the number of months to get an average. Then it takes away the expense factor. What is left is the monthly income used to qualify you.

Say your business deposits average $25,000 a month. At a 20% factor, the lender treats $5,000 of that as overhead and qualifies you on $20,000. At a 50% factor, it treats $12,500 as overhead and qualifies you on $12,500. Same bank account, same business, same owner. The only thing that changed is the assumption about what it costs to run the business.

That is why we tell business owners the expense factor matters more than almost anything else in a bank statement file. Your deposits are what they are. The factor is where the conversation happens.

Why your industry changes the number

Lenders set expense factors by looking at how a type of business usually operates. A business that buys materials, pays a crew, runs trucks or rents a storefront tends to spend a bigger share of every dollar it brings in. A business that sells mostly time and expertise tends to keep more. The factor is a shortcut for that difference.

Read that table as a map, not a quote. Two contractors can run very different businesses. One subs out everything and buys the materials. Another bills labor only and the client buys the cabinets. The second one may be a much leaner business than the label suggests, and that is exactly the kind of detail that belongs in the file.

Where your CPA comes in

Our program's range is 10% to 50%, and the two things that place you inside it are your industry and your CPA. When the lender has nothing but the industry to go on, it leans on the industry default. When a CPA who knows your books can document what your business really spends, the file has something better than a default.

What a CPA can typically speak to is how long they have prepared your returns, what kind of business you run, and the share of revenue your business really spends on operating costs. Exactly what a given lender accepts is confirmed per file, so ask us before your CPA writes anything. A short call between us and your CPA usually saves a second draft.

One honest note. A CPA is not going to put a lower number on paper just because it helps you qualify, and you should not want them to. The letter has to match your books, because your books have to match your tax returns. The good news is that for a lot of lean service businesses, the real number already is lower than the default. It just was never written down.

Worked example: three Arizona businesses, same deposits

Example numbers, not market data and not a quote. Each owner below deposits an average of $25,000 a month into a business account. The expense factors are examples placed inside our 10% to 50% range to show how much the number matters.

Look at the last two rows. The contractor's business did not change, but documenting the real cost of running it moved qualifying income by $5,000 a month. To make that concrete, imagine, for example only, that a lender wanted total monthly debts to stay at or under 40% of income. That example ratio is not one of our program terms; it is here only to turn income into a payment. At $12,500 of income the room for all debts is $5,000 a month. At $17,500 it is $7,000. That $2,000 difference is roughly the principal and interest on a $295,000 loan at the Freddie Mac survey's 30 year fixed average of 7.18% for the week of November 5, 2026, a benchmark only, not a Pillar Mortgage Group rate.

Now compare that to the tax return. Say the same contractor's CPA took legitimate deductions that brought the net on the return to $6,000 a month. A full doc loan qualifies on that $6,000. The bank statement loan qualifies on $12,500 at the default factor, or $17,500 with the CPA's documentation. That gap is the whole reason bank statement loans exist, and it is the heart of the write offs question: the write offs that lower your tax bill do not have to shrink your home.

That does not mean the bank statement loan is automatically the better deal. It usually carries a higher rate than a full doc loan, so the honest test is whether the house you can buy, and the tax savings you keep, are worth the extra interest. The calculator below runs that comparison. This is not tax advice, so take your real deductions from your CPA before you rely on the result.