A bank statement HELOC allows borrowers with an existing home mortgage to pull cash out of their home equity by taking out a second mortgage based on bank statements rather than tax returns.

Many self-employed borrowers maximize deductions to reduce their tax liability, which can make qualifying for a traditional home equity line of credit (HELOC) more difficult. A Bank Statement HELOC offers a flexible alternative by allowing borrowers to qualify using business bank statements instead of tax returns.

Whether you're looking to renovate your home, consolidate higher-interest debt, invest in real estate, expand your business, or simply access the equity you've built over the years, a Bank Statement HELOC can provide the financing you need without refinancing your existing first mortgage.

Minimum credit scores include:

660 FICO for primary residences and second homes

700 FICO for investment properties

Higher credit scores may qualify for better pricing and higher loan amounts.

If you're self-employed, you know your tax returns don't always reflect what you actually earn. That's why bank statement loans use your business or personal bank statements to estimate your qualifying income instead of relying on tax returns or W-2s.

Here's how the process typically works:

Step 1: Gather Your Bank Statements

Most lenders require 12 or 24 months of bank statements. Depending on the loan program, they may accept:

Business bank statements

Personal bank statements

A combination of both

Step 2: Add Up Your Eligible Deposits

The lender reviews your monthly deposits and identifies recurring business income. Certain deposits are excluded, such as:

Transfers between accounts

Loan proceeds

Gifts

Tax refunds

One-time or unusual deposits that aren't part of your normal business income

The goal is to determine your actual business revenue rather than simply adding every deposit.

Step 3: Apply an Expense Factor (Business Accounts)

If you're using business bank statements, lenders recognize that businesses have operating expenses. Most lenders apply an expense factor to estimate your net income.

For example:

Average monthly business deposits: $30,000

Expense factor: 50%

Qualifying monthly income: $15,000

Some industries may qualify for lower expense factors if they have relatively low overhead, while others may require higher expense assumptions. In some cases, a CPA letter can verify your actual business expense ratio, allowing you to qualify using more of your deposits.

Step 4: Calculate Your Average Monthly Income

After adjustments, the lender averages your qualifying income over the number of months reviewed.

For example:

Total qualifying deposits after adjustments: $288,000

24-month average

Monthly qualifying income: $12,000

That monthly income is then used to calculate your debt-to-income ratio (DTI) for loan approval.

You would provide 12 or 24 months of bank statements to the lender and then based on your expense factor the lender would tell you what your monthly qualifying income is.

This income would then be used against your debts and the new HELOC payment and your debt to income ration cannot exceed 43% DTI on loans over $500,000 and 50% DTI on loans under $500,000.