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Your Bank Deposits Are Your Income — Not Your Tax Return.
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
How Bank Statement Income Works for Attorney in Private Practice
A Charlotte plaintiffs’ attorney runs a 3-attorney personal injury firm. Gross revenue structure:
The practice settles 22–28 cases per year. Settlement proceeds deposit to the IOLTA trust account — these are NOT qualifying deposits. The attorney’s fee portion (typically 33–40% of settlement) transfers from IOLTA to the operating account. That transfer is the qualifying deposit.
24-month business operating account deposits:
– Year 1: $580,000 (strong settlement year)
– Year 2: $390,000 (lighter year — one major case carried over)
– 24-month average: $485,000 / $40,417/month gross deposits
CPA certifies 38% expense ratio (associate pay, paralegal, office, E&O, research subscriptions).
Qualifying income: $40,417 × 62% = $25,058/month.
Target: $1,100,000 SFR in Myers Park, Charlotte.
Loan at 85% LTV: $935,000.
PITIA: $7,560/month. Other debt: $1,400/month.
DTI: $8,960 ÷ $25,058 = 35.8%.
Note on the irregular deposit pattern: The 24-month average smooths the year-to-year variability inherent in contingency practice. The loan officer documents the case cycle to explain the pattern to underwriting.
Your Documentation Strategy
Attorney-Specific Documentation Issues
IOLTA is not your income. Trust accounts hold client funds. Never include IOLTA account statements in your income documentation. Only operating account statements — where your fee income transfers — are used. Submitting trust account statements is a documentation error that creates underwriting confusion.
Contingency fee deposits are irregular by nature. Large, infrequent deposits followed by periods of lower activity are the normal pattern for plaintiffs’ attorneys. Underwriters understand this with a brief explanation letter. Document that the deposits represent fee income from case settlements, not irregular or one-time events.
Retainer income is cleaner for bank statements. If you have a mix of contingency and retainer work, the retainer income creates a more consistent monthly deposit baseline. This makes the file simpler to underwrite. If retainer income is significant, it may be worth emphasizing in the loan officer conversation.
Partnership distributions: If you’re a partner in a law firm receiving K-1 distributions, those distributions depositing to your personal account are personal bank statement income — treated the same as the physician example. No expense ratio applied.
What You Need to Qualify
- Credit Score: Minimum 640. Best terms at 720+.
- Down Payment: Minimum 15% (85% max LTV).
- Self-Employment: 2 years documented.
DTI Maximum: 50% standard. Up to 55% under specific conditions on primary residence.
Loan Amount: $150,000 to $4,000,000.
Documentation: 12 or 24 months personal or business bank statements.
CPA Expense Letter: Strongly recommended for most borrowers in this profession.
Frequently Asked Questions
Can a contingency fee attorney qualify for a bank statement loan despite irregular deposits?
Yes. Contingency fee income has a natural deposit pattern — large settlements followed by gaps between cases. The 24-month averaging period captures multiple settlement cycles and produces a stable qualifying income average. A brief explanation of the practice’s case cycle typically satisfies underwriting’s inquiry about the deposit pattern.
Does my IOLTA trust account count toward bank statement income?
No. IOLTA funds belong to clients and are not income. Never include IOLTA account statements in your application documentation. Only operating account statements where your attorney fees deposit are used for income calculation.
Can a solo practitioner attorney qualify for a bank statement loan?
Yes. Solo practitioners with 2+ years of documented practice history are eligible. Business bank statements from the operating account are used. A CPA expense letter certifying actual overhead (typically 30–50% for solo practices) is recommended.
Go Deeper
About the Author
Mayer Dallal is the Managing Director of Mbanc (Mortgage Bank of California, NMLS #38232), a consumer-direct Non-QM lender specializing in bank statement loans, DSCR loans, and asset utilization programs for self-employed borrowers and real estate investors. Mbanc is licensed in 24 states for primary residence lending and 46 states for investment property financing.
You’ve Been Evaluated on the Wrong Number. Let’s Use the Right One.
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
| Mortgage Bank of California
