Stated Income Loans: Alternatives and Options for 2026

Ideal for self-employed borrowers or those with variable income, bank statement loans use 12–24 months of personal or business bank statements to verify income instead of tax returns.

How bank statement loans work

Lenders offering bank statement loans will typically review 12–24 months of your personal or business bank statements to determine your average monthly income. They may also require a profit and loss statement (P&L) to get a better understanding of your business’s financial health.

Example: Sarah is a freelance graphic designer who has been self-employed for three years. She applies for a bank statement loan and provides her lender with 12 months of personal and business bank statements, along with a P&L. The lender averages her monthly deposits to determine her income and approves her for the loan.

Also known as asset-qualifier loans or asset-based mortgages, these loans enable borrowers to be approved on the basis of their liquid assets rather than their income. The lender uses a formula to calculate the borrower’s monthly income from their assets.

How asset depletion loans work

With an asset depletion loan, your lender will total up your liquid assets (such as checking and savings accounts, investments, and retirement accounts) and use a formula to determine your monthly income from these assets. Typically, they will divide your total assets by 360 (the number of months in a 30-year loan term) to calculate your monthly income.

Example: John is a retired home buyer with $1 million in liquid assets. He applies for an asset depletion loan, and his loan officer calculates his monthly income as $2,778 ($1,000,000 / 360). With this income, he is able to qualify for a mortgage loan.

Designed for real estate investors, this type of loan qualifies borrowers based on the projected income of the rental property they’re purchasing rather than their personal income.

How investor cash flow loans work

With an investor cash flow loan, your mortgage lender will use the investment property’s projected rental income to determine your ability to repay the loan. They may require a rental analysis or appraisal to estimate the property’s potential rental value. The lender will then use a formula (such as the Debt Service Coverage Ratio, or DSCR) to ensure that the property’s income can cover the mortgage payments and other expenses.

Example: Mark is a real estate investor looking to purchase a rental property. He applies for an investor cash flow loan and provides his loan officer with a rental analysis showing that the property is expected to generate $2,000 per month in rental income. The lender uses this information to calculate the property’s DSCR and determines that the income is sufficient to cover the mortgage payments and other expenses. Mark is approved for the loan.

Fannie Mae and Freddie Mac, the two main government-sponsored enterprises that purchase mortgages from lenders, do offer conventional loans to self-employed borrowers. However, these loans typically require more extensive income documentation compared to stated income loans.

Self-employed borrowers applying for a conventional loan will usually need to provide 1-2 years of personal and business tax returns, along with a year-to-date profit and loss statement (P&L) and balance sheet. The lender will use these documents to calculate your income and determine your ability to make monthly mortgage payments.

Government-backed loans, such as FHA, VA, and USDA loans, can also be an alternative for self-employed borrowers or those with complicated financial situations. These loans typically have more lenient credit score minimums and down payment requirements compared to conventional loans.

However, like conventional loans, government-backed loans will require you to document your income with tax returns and other financial statements in lieu of pay stubs. The specific documentation requirements may vary depending on the loan program and your individual circumstances.

Example: Laura is a small business owner and has been in operation for five years. She applies for an FHA loan and provides her lender with two years of personal and business tax returns, along with a year-to-date P&L and balance sheet. The lender uses these documents to calculate her income and determines that she meets the FHA’s income requirements. Laura is approved for the loan with a 3.5% down payment.

Real estate investors frequently use hard money loans—short-term loans from private lenders—for fix-and-flip or renovation projects. These loans typically have less stringent income documentation requirements compared to conventional mortgages.

How hard money loans work

Hard money lenders focus primarily on the value of the investment property being used as collateral rather than the borrower’s income or credit score. They may require a down payment of 20–30% and charge higher interest rates and fees compared to traditional mortgages. Hard money loans are usually short-term, lasting from a few months to a few years.

Example: Tom is a real estate investor who wants to purchase a distressed property, renovate it, and sell it for a profit. He applies for a hard money loan and provides the lender with information about the property’s current value and his renovation plans. The lender approves the loan based on the property’s expected after-repair value (ARV), and Tom uses the funds to purchase and renovate the property.