Bank statement loans allow freelancers, gig workers, contract workers, entrepreneurs, and self-employed individuals the opportunity to qualify for a mortgage with bank statements. So what exactly determines your bank statement loan interest rates?
At Defy Mortgage, non-QM loans like bank statement loans are our specialty. Whether you’re looking to finance an investment property or tap into stored home equity, we’ve got a tailor-made solution for your unique situation. Combined with our competitive rates, seamless platform, and the in-depth support of your own personal Mortgage Consultant, we offer a mortgage experience like no other.
In this article, we’ll explain how bank statement mortgage loan rates differ from conventional loans and what factors are considered when determining them. Then, we’ll go into how you can potentially reduce the rates you can get for a bank statement loan and any alternatives.
Let’s begin.
What Are Bank Statement Loan Interest Rates?
Bank statement loan interest rates are typically 0.5% to 2% above those of conventional loans. As of May 2025, the average 30-year fixed conventional mortgage rate stands at 7.018% with a FICO score of 780, so you can expect bank statement loan rates between 7.5% and 9%. Please note that the rate varies by lender and state.
A bank statement loan is a type of non-QM mortgage that allows borrowers to use their bank statements to buy a home. Traditional mortgages require traditional income verification, such as W-2s, tax returns, or pay stubs as proof of income.
Bank statement loans, on the other hand, let borrowers use bank statements to prove their average monthly income instead. This allows individuals whose income comes from non-salaried sources, such as business owners and self-employed professionals, to accurately demonstrate their cash flow.
Why Banks Charge Higher Interest Rates on Certain Loans
Lenders charge higher interest when they think there’s a bigger chance they won’t get their money back. This is why individuals with poor credit are charged higher rates. As an additional example, credit card debt typically has higher interest than mortgages because there will be no property to take back if you’re unable to pay off the credit card debt.
With bank statement loans, the main risk comes from using an alternative income verification process. Information on W-2s and tax returns is constantly verified by the IRS, so lenders have more certainty in its accuracy.
This is not the case with bank statement loans, which offer more flexibility but require lenders to put in extra work and scrutinize multiple deposit sources. The variability in this more complex underwriting process introduces a higher risk of human error, which translates to slightly higher interest rates
Bank Statement Loan Example
Matt is self-employed. Over the past three years, his freelance writing business has earned a little over $7,400 a month. He has student loans of about $650 a month. He’s been having trouble qualifying for a traditional mortgage due to his income. Since it fluctuates and lenders like to see W-2s, he’s been denied for conventional mortgages in the past.
At an 8.5% interest rate with a bank statement loan, Matt could theoretically qualify for a mortgage in the $200-$250k range, depending on some other factors like his credit score and money down.
Bank Statement Loan Terms from Defy Mortgage
When you apply for a bank statement loan from Defy, we won’t ask for tax returns or your W-2s. Instead, we’ll need to see 12-24 months of your bank statement (personal or business) documents. Other requirements and terms include:
- Up to 90% LTV, loan-to-value
- Minimum FICO of 620
- Loan amounts up to $6M+
How Are Bank Statement Loan Rates Determined?
Like most loans, bank statement loan rates depend on how well you meet the various criteria that lenders impose on this loan product. Here’s a brief breakdown of the factors that affect terms:
- Credit score: This is the primary metric for how well you have met past debt obligations, and thus how risky you are as a borrower. At Defy, our minimum credit score for bank statement loans is 620, but a score of 680 or higher can unlock better rates.
- Down payment: At Defy, our bank statement loan LTVs go up to 90% of the property’s purchase price, meaning your minimum down payment can be as low as 10%. However, putting a larger amount down significantly mitigates lender risk, which could lower rates.
- Cash reserves: Although regular deposits are what mainly affect eligibility, having a lot of cash saved in your bank account can also help you qualify and get better terms. Lenders look at your cash reserves to gauge how much of the loan you might be able to cover with your savings should your income be interrupted.
- Self-employment duration: To some extent, how long you have been self-employed can also affect lender confidence. Demonstrating consistent self-employed income over the course of years can help you secure lower mortgage rates.
- Property type: If you intend to use the bank statement loan for home financing, the type of property can affect the risk profile. Properties that are in demand and display steady appreciation, such as urban properties in California and New York, are less risky and can invite better rates.
- Qualifying income: Although it mainly affects maximum loan amount, demonstrating higher qualifying bank statement income can lead lenders to offer you lower rates, as it can be a sign that you’ll be more likely to have enough income to meet monthly debt payments.
How to Reduce Your Bank Statement Loan Interest Rate?
You can potentially reduce the interest rate for a bank statement loan by shopping around for mortgage rates, putting more money down, having a better credit score, or having a very low DTI ratio.
1. Shop Around for Mortgage Rates
Different mortgage lenders offer different rates. At Defy, we offer competitive rates on our bank statement loans. Each client is offered options specifically tailored to meet their unique needs—no application fee or obligation when you apply —and access to 24/7 one-on-one white glove service from your own personal Mortgage Consultant.
2. Improve Your Credit Score
Your credit score is a gauge of how “risky” it is to lend money to you. If you have a lower credit score, banks and lenders are more worried about getting their money back and will charge a higher interest rate. If you want to decrease the amount of interest that you’ll have to pay, one of the best ways is to increase your credit score.
3. Have a Larger Down Payment
For bank statement loans, a larger down payment can make a big difference. Since these loans are considered higher risk due to their alternative income verification, making a larger down payment helps offset that risk for the lender.
While you still have a chance of approval by meeting the minimum down payment requirements, offering more than the minimum may help you qualify for a lower interest rate or better terms.
4. Purchase a Rental Property with a Strong Income History
When an asset generates income, most lenders view it as a reduced risk. Sometimes you can get a lower interest rate by showing that the asset, in some ways, pays for itself.
While bank statement loans still use your personal or business income to qualify, some lenders may offer better terms if the property itself is income-generating. However, if your goal is to qualify based on the rental income alone, you may be better off with a DSCR loan, which is specifically designed for that purpose.
5. Adjust the Loan Term
While it might not improve the monthly payment, one way that you can reduce your interest rate is by reducing the amount of time that it’ll take you to pay it back. Some lenders view longer loans as riskier, which is why shorter loans can have lower interest rates.
However, this also means your monthly payments will be higher, since you’re paying off the loan in a shorter amount of time. Not all bank statement lenders offer lower rates for shorter terms, so it’s worth checking with your lender.
Alternatives to Bank Statement Loans
If bank statement mortgage rates aren’t ideal for you, you might be interested in other non-QM loan options that better fit your situation. Here are a few of the best alternatives to bank statement loans:
- DSCR Loans: This type of loan uses an investment property’s income potential for qualification, instead of your personal income.
- P&L Loans: Use business profit and loss statements to demonstrate income. Ideal if you want to use business income to qualify, but would rather not use business bank statements.
- Foreign National Loans: A category of loans that provide mortgages for foreign nationals without a US credit score or Social Security number.
- Asset Depletion Loans: Use liquid assets like stocks and bonds to stand in for income. The total value of these assets is divided by the total months over the life of the loan, and this average is considered the borrower’s income.
- Interest-Only Loans: Pay only interest for up to 10 years for more manageable payments while you develop your income streams.
- Portfolio Loans: These mortgages are kept by the lender themselves in their portfolio, rather than selling it on the secondary mortgage market. Having full control over the loan, they have more discretion with loan criteria and qualifications.
- FHA Loans: This government-backed loan offers low down payment (as low as 3.5%) and rates, but comes with minimum property requirements and mortgage insurance premiums (MIPs), both upfront and annually.
Bank Statement Loan Interest Rates FAQ
How do lenders calculate qualifying income from bank statements?
Lenders look at regular deposits from sources such as business revenue and self-employed income over a set period, usually 12-24 months. One-off or irregular deposits are not considered. After identifying these qualifying deposits, lenders divide the total amount by the number of months in the period to get the borrower’s average monthly income.
What are the biggest red flags for underwriters?
Unexplained large deposits and documentation inconsistencies usually raise red flags due to the possibility of fraud or alterations. Overdrafts, NSFs (non-sufficient funds), and negative cash flow signal income instability that could jeopardize mortgage payments. Large, unexplained deposits and other inconsistent income patterns can also draw negative attention.
Can I refinance with a bank statement loan?
Absolutely! Defy offers bank statement refinances, which can be a great option if you originally purchased your home with a traditional mortgage loan, but have since shifted to a non-salaried career path. We also offer bank statement loan cash-out refinance and bank statement home equity loans, which allow you to access your home’s equity in the form of a lump sum of cash.
How many months of statements do I need?
At Defy, we ask for a minimum of 12 months of bank statements, but 24 months would be ideal.
What is a non-QM loan?
A non-QM loan is any loan that isn’t purchased by Fannie Mae or Freddie Mac. This gives lenders more flexibility in how they qualify borrowers for loans like bank statement and DSCR loans.
What if I have seasonal income?
Let your lender know upfront if you have seasonal income. As long as seasonal income appears consistently year after year, it can qualify just like other monthly income. If there is sufficient regularity to your seasonal income, they’ll have a better chance of qualifying. In some cases, it may be best to show 24-36 months of bank statements in order to fully exhibit that your seasonal income is consistent and reliable.
What are my alternatives if I don’t qualify?
If a bank statement loan isn’t the right fit for you, you might be better served with a DSCR loan, which is specifically geared towards real estate investors looking to leverage high-performance properties to secure a mortgage. P&L loans, on the other hand, let you qualify with profit-and-loss statements rather than bank statements, and asset depletion loans let you use liquid assets such as stocks and bonds to stand in for your income.
Who is a good candidate for a bank statement loan?
Essentially, everyone who makes sufficient income that, for any reason, cannot be represented accurately using traditional documentation such as W-2 forms, tax returns, or pay stubs. This includes freelance employees, contract workers, consultants, realtors, retirees, sole proprietors, gig economy workers, small business owners, independent contractors, and entrepreneurs.
How much down payment is required for a bank statement mortgage?
At Defy, at least a 10% down payment is required for a bank statement mortgage. Many other lenders require anywhere from 15-20%.
What’s the difference between a bank statement loan and a traditional loan?
A traditional mortgage uses W-2s as proof of income to show that you can repay the loan. Bank statement loans use bank statements – either personal or business – since not everyone has a W-2 or a traditional job.
Can I use a bank statement loan on a second home?
You can use a bank statement loan on a primary residence, second home, vacation home, or investment property.
Do bank statement loans require PMI?
Bank statement loans typically do not require traditional PMI. At Defy, we don’t require PMI for bank statement loans.
How much income do you need for a bank statement loan?
As of May 2025, interest rates for bank statement loans are in the 8-10% range. If you’d like to qualify for a $300k mortgage at an 8.5% interest rate, you’ll need to make about $90k–$100k in annual income, depending on your other debts and the lender’s DTI limits.
How do I apply for a bank statement loan?
If you’re ready to apply, click HERE to get started.
Key Takeaway
Like most loans, bank statement loan interest rates are primarily affected by your financial profile, your credit score, your down payment amount, etc. However, as a non-QM loan that relies primarily on alternative income verification, bank statement mortgage rates can also be affected by the amount of qualifying income on your bank statements, how long you have been receiving consistent qualifying income, and your cash reserves.
Adjusting your credit behavior to improve these aspects can lead to much lower interest rates when you take out a bank statement loan in the future. Shortening your loan term and purchasing a property with a strong income or appreciation history can also reduce your risk profile.
At Defy, we offer tailored options that let you adjust a wide variety of loan terms to fit your strategy. Don’t hesitate to schedule an appointment on our site, email us at team@defymortgage.com, or give us a call at (615) 622-1032. We always have a mortgage expert standing by to answer any questions you may have.
