Your Bank Deposits Are Your Income — Not Your Tax Return.

Mbanc NMLS #38232 | Equal Housing Opportunity Lender

How Bank Statement Income Works for General Contractor, Specialty Trade, Construction Operator

A Fort Worth general contractor builds 6–8 custom homes per year in the $400,000–$600,000 range. Business structure: LLC with the owner as sole member.

24-month business bank statement analysis:
– Total 24-month deposits: $4,260,000
– Monthly average gross deposits: $177,500

Actual cost structure (from CPA-reviewed records):
– Materials and subcontractors: 62% of gross
– Direct labor: 8%
– Equipment and vehicle: 3%
– Overhead (insurance, permits, office): 3%
– Total costs: 76%
– Net margin: 24%

CPA certifies 76% actual expense ratio.
Qualifying income: $177,500 × 24% = $42,600/month / $511,200 annually.

Target: $1,050,000 SFR in Westover Hills, Fort Worth.
Loan at 80% LTV: $840,000.
PITIA at current rates: $6,800/month. Other debt: $1,900 (equipment loan, truck, credit).
DTI: $8,700 ÷ $42,600 = 20.4%. Excellent file.

Critical insight: The CPA letter at 76% is significantly better than the standard 50% ratio. At 50% ratio: qualifying income would be $88,750/month — which seems higher, but 50% doesn’t accurately reflect this contractor’s actual cost structure. The accurate CPA method shows $42,600/month. Both are vastly superior to the tax return’s implied income figure.

Your Documentation Strategy

Contractor-Specific Documentation Strategy

The CPA letter is the most important document you’ll prepare. Contractors have the most complex expense ratios of any self-employed borrower type. Materials pass-through, subcontractor payments, equipment purchases — these look like expenses on a bank statement and on your return. A CPA letter that accurately states your net margin as a percentage of gross revenue translates your actual earnings into a qualification figure the underwriter can use.

Separate project revenue from materials pass-through. Some contractors pay for materials from the same account that receives project payments, creating large outflow transactions that might be misread. Your loan officer will review the statement to separate gross revenue deposits from operating disbursements. The income analysis uses deposits only — disbursements reduce the accuracy concern.

Large variable deposits — explain the project cycle. A commercial contractor might receive $280,000 in one month when a large project completes and $18,000 the next month while between projects. An explanation letter that describes the project billing cycle — progress payments, completion payments — helps underwriting understand the pattern rather than flag it.

Subcontractor businesses vs general contractors: If you are a subcontractor (electrical, plumbing, HVAC, roofing) with a specialty trade business, the same approach applies. Your specific trade’s expense ratio is different from a GC’s — a residential electrician may have a 40–55% expense ratio versus a GC’s 70–80%. Get the CPA letter calibrated to your specific business type.

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 general contractor qualify for a bank statement loan on their primary residence?

Yes. General contractors are among the most common bank statement loan borrowers. The CPA expense ratio letter is strongly recommended — construction businesses have the highest variation between gross revenue and net margin, making the letter most impactful.

How does a contractor’s variable monthly income affect qualification?

Variable deposits from project completions are handled through 24-month averaging. The average monthly deposit across the full period captures high-revenue months and slow months. An explanation of the project billing cycle helps underwriters understand the pattern.

What if I pay subcontractors from my business account?

Subcontractor payments are outflows from the business account. The bank statement income analysis uses deposit amounts only — incoming revenue. The expense ratio applied to deposits accounts for the fact that a portion of gross revenue goes to subcontractor payments.

Can I use a bank statement loan if my contracting business is less than 2 years old?

No. Bank statement loan programs require 2 years of documented self-employment. If your business is less than 2 years old, you do not yet meet this requirement.

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 22 states for primary residence lending plus an additional 24 states and Washington DC for non-owner-occupied investment property financing under the business-purpose exemption.

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