I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I run conventional and bank statement scenarios side by side for every self-employed client — the right answer is in the numbers, not a blanket rule. Call (800) 239-1103.
If you are self-employed and shopping for a California mortgage, you are likely weighing two very different paths: a conventional loan that uses your tax returns, or a bank statement loan that uses your deposit history. Here is how they compare — and which is likely to work better for you.
The Core Difference
Conventional loans (Fannie Mae, Freddie Mac, FHA, VA) use your federal tax return income averaged over two years. Bank statement loans use your actual bank deposits averaged over 12 or 24 months, ignoring tax returns entirely. For self-employed borrowers who write off aggressively, the bank statement loan almost always produces higher qualifying income. For self-employed borrowers who show most of their income on their return (minimal deductions), a conventional loan may produce better rates.
Full Comparison
| Feature | Conventional Loan | Bank Statement Loan |
|---|---|---|
| Income documentation | 2 years tax returns (Schedule C/K-1) | 12–24 months bank statements |
| Write-offs impact income? | Yes — reduces qualifying income | No — uses deposits, not net income |
| Interest rates | Market rate (lower) | 0.5–1.5% higher than conventional |
| Min down payment | 5–10% on primary | 10% on primary |
| Min credit score | 620 (Fannie); 580 (FHA) | 620 |
| Max loan amount | $832,750 baseline; up to $1,249,125 in SF/Marin/San Mateo | $3M+ with many lenders |
| Self-employment history required | 2 years | 12–24 months with some lenders |
When Conventional Wins
If your tax returns show strong income relative to your purchase price — meaning your Schedule C net is close to your actual cash flow — conventional financing offers lower rates. Some self-employed borrowers who pay themselves mostly in salary (W-2 from their own S-corp) can qualify conventionally at great rates. If you’re buying under the conforming limit and your return income supports the payment, conventional is almost always the better call.
When Bank Statement Wins
Almost every time your write-offs have significantly reduced your taxable income below your actual cash flow. The rate premium on a bank statement loan is often worth paying for the buying power you gain. Additionally, bank statement loans go well above conforming limits — making them ideal for jumbo purchases in Bay Area and Marin County markets where even modest homes exceed $1.5M. Many of my Marin and SF clients couldn’t qualify conventionally for what they want to buy, but their deposit history easily supports the payment.
Can You Get a Conventional Loan Later?
Yes. Many borrowers use a bank statement loan to purchase, then refinance into a conventional loan in 1–2 years once their tax returns better reflect their income. Non-QM is the bridge; conventional is the destination. I plan this path with clients from the start — knowing the refinance exit makes the bank statement option more palatable.
Frequently Asked Questions — Bank Statement vs. Conventional Mortgage
Can a self-employed borrower get a conventional mortgage in California?
Yes — but conventional lenders use your tax return net income averaged over two years, which means aggressive write-offs directly reduce your qualifying income. If your Schedule C shows $80,000/year after deductions but your bank deposits reflect $200,000/year in actual cash flow, you’ll qualify for much less on a conventional loan. Many self-employed California borrowers end up with a bank statement loan not because they can’t qualify conventionally, but because the bank statement loan qualifies them for the home price they actually want to buy.
How much higher is the rate on a bank statement loan vs. conventional?
Typically 0.5%–1.5% above the conventional 30-year fixed rate, depending on loan amount, LTV, credit score, and lender. On a $1.5M loan, that premium might be $750–$1,875/month in additional interest cost. Whether that’s worth it depends on the qualifying income difference — if a conventional loan only supports $900K but the bank statement loan supports $1.5M, the rate premium is a small price for the additional buying power. I run this math explicitly for every self-employed client.
How soon after using a bank statement loan can I refinance into conventional?
There’s no mandatory waiting period imposed by conventional guidelines for this scenario — it’s not a cash-out refinance rule situation. You can refinance into conventional as soon as your tax returns support the income needed to qualify at your loan balance and current rates. Most self-employed borrowers who take this path refinance after 1–2 tax filing cycles during which their returns better reflect actual income. The bank statement loan has no prepayment penalty with most lenders, so timing the refinance is purely a function of when the conventional qualification math works.
Related: Self-employed mortgage hub | Bank statement loans
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
