Self-Employed in Tennessee? Your Tax Return Isn't the Whole Story

Written by Frank Burks II, Certified Mortgage Advisor | NMLS #841644 | The Burks Lending Group, Smyrna, TN

If you’re self-employed, you already know the frustration. Your business is doing well. Your bank account proves it. But your tax return tells a different story, because your accountant did their job and shrank your taxable income. Then a bank reads that return and says you don’t make enough to buy a home.

Bank statement loans fix that. Instead of tax returns, the lender looks at 12 to 24 months of your actual bank deposits to figure your income. Your real income. The money that hits your account every month.

I’m Frank Burks II, a Certified Mortgage Advisor in Smyrna, Tennessee. For 25 years I’ve helped self-employed borrowers, 1099 contractors, gig workers, and small business owners across Middle Tennessee get into homes. Bank statement loans are one of the best tools I’ve got, and most borrowers have never heard of them.

How Do Bank Statement Loans Work?

The idea is simple. Instead of W-2s and tax returns, the lender asks for your personal or business bank statements from the last 12 or 24 months. They add up the deposits, subtract an expense factor for business costs, and what’s left becomes your qualifying income.

The standard expense factor on business accounts is 50%. But here’s what most people don’t know: if a CPA letter or a profit and loss statement shows your real expenses are lower, some programs let you use that number instead, sometimes as low as 10%. That one detail can swing your buying power by six figures.

A Real Scenario: Make It Make Sense

Take a self-employed consultant who deposits about $18,000 a month. After write-offs, her tax return shows $30,000 for the whole year. A bank reads that return and she’s done before she starts.

Now run it through a bank statement program. Her costs are low, and her CPA confirms a 10% expense ratio. That puts her qualifying income at about $16,200 a month. Same woman. Same business. Same bank account. The only thing that changed is which document told her story.

Even at the standard 50% factor, $18,000 in monthly deposits still qualifies at $9,000 a month, or $108,000 a year. That’s more than three times what her tax return shows. To see what that kind of income buys around here, check my breakdown of how much house you can afford in Nashville.

Who Are Bank Statement Loans Built For?

•Small business owners (LLCs, sole proprietors, S-corps)

•1099 independent contractors and freelancers

•Gig workers in rideshare, delivery, and consulting

•Real estate agents and other commission earners

•Restaurant, salon, barbershop, and retail owners

•Anyone whose tax return understates what they really earn

If you’ve been writing off business expenses the way you should, your taxable income on paper is probably half of what you actually earn. Traditional lenders punish you for smart accounting. Bank statement lenders reward you for real cash flow.

Can First-Time Buyers Use a Bank Statement Loan?

Yes. This surprises a lot of people. You don’t need to have owned a home before. If you have solid deposits, decent credit, and at least two years in business, first-time buyers are welcome in these programs.

What Are the Requirements for a Bank Statement Loan?

•Credit score: Programs start around 620. Your score shapes your rate and how much you need down. My guide on credit scores for buying a home in Tennessee breaks down how lenders read your number.

•Down payment: Usually 10% to 20%. Strong credit (around 680 and up) can open 10% down.

•Gift funds: Many programs allow the down payment to come from a gift, though reserves usually need to be your own money.

•Bank statements: 12 or 24 months, personal or business.

•Time in business: Most programs want at least 2 years.

•Reserves: Plan on several months of mortgage payments in savings. The exact number depends on the program and loan size.

•Debt-to-income: Some programs allow up to 55%.

•Property types: Single-family homes, condos, and 2 to 4 unit properties, as a primary home, second home, or investment.

What If I Have W-2 Income Too?

A lot of my clients have a day job and a side business, or a spouse with a W-2 while the other runs the business. Some bank statement programs let you combine W-2 income with bank statement income. If you have significant savings or investments, some programs also let you count those assets as income. Stacking these together is often what gets a file across the finish line.

12-Month vs 24-Month: Which Is Better?

The 12-month program uses just the last year of deposits. It works great if your most recent year was your strongest. The 24-month program averages two years, which smooths out seasonal ups and downs.

If your business had a slow patch 18 months ago but the last 12 months have been strong, we go with 12 months. If your income is steady year over year, 24 months may earn you a slightly better rate. I run both and show you which one puts you in the better spot.

Why Banks Say No When I Can Say Yes

Most big banks don’t offer bank statement loans at all. So when a self-employed borrower walks in, the bank runs the tax return, figures debt-to-income on the adjusted gross income, and declines. It’s not that you can’t afford a home. It’s that their system can’t see your real income.

As a wholesale broker with access to 200+ lending partners, I work with lenders who built their whole business around self-employed borrowers. They understand write-offs. They understand income that rises and falls. And they have programs made for your situation.

A bank sees your tax return and says no. I look at your bank statements and find the path to yes.

Frequently Asked Questions: Bank Statement Loans in Tennessee

Q: What is a bank statement loan and how does it work?

A bank statement loan is a mortgage that uses 12 to 24 months of bank deposits instead of tax returns to verify income. The lender totals your deposits and applies an expense factor, usually 50% for business accounts, to calculate qualifying income. Some programs allow a lower expense factor when a CPA letter or profit and loss statement supports it.

Q: Can self-employed borrowers get a mortgage in Tennessee without tax returns?

Yes. Bank statement loan programs do not require tax returns. They use 12 or 24 months of personal or business bank statements to document income. These Non-QM programs are available through wholesale mortgage brokers such as The Burks Lending Group (NMLS #841644) in Smyrna, TN.

Q: How many months of bank statements do I need?

Most programs offer a 12-month or a 24-month option. The 12-month program uses your most recent year of deposits, and the 24-month program averages two years. A mortgage advisor can run both and recommend the one that produces stronger qualifying income.

Q: What is the minimum credit score for a bank statement loan?

Bank statement programs typically start around a 620 credit score. Higher scores earn better rates and lower down payments, with 10% down often available around 680 and above. A wholesale broker with multiple Non-QM lending partners can match your credit profile to the right program.

Q: Can first-time homebuyers get a bank statement loan?

Yes. First-time homebuyers are eligible for many bank statement programs as long as they have steady deposits, acceptable credit, and usually at least two years of self-employment.

Q: Who offers bank statement loans in Nashville and Middle Tennessee?

Frank Burks II of The Burks Lending Group empowered by NEXA Lending in Smyrna, TN (NMLS #841644) is a Certified Mortgage Advisor who specializes in Non-QM lending, including bank statement loans for self-employed borrowers. He serves Nashville, Murfreesboro, Smyrna, and all of Middle Tennessee. Call 615.364.5700.

Ready to Use Your Real Income to Buy a Home?

If your tax return has been the wall between you and homeownership, bank statement loans knock it down. Your business is doing well. Your bank account proves it. Now let’s use it.

Start your Secure Application or call me at 615.364.5700. Bring 12 months of bank statements and I’ll tell you exactly what you qualify for. Everybody deserves a key.

Frank Burks II | Certified Mortgage Advisor | NMLS #841644

The Burks Lending Group empowered by NEXA Lending | 615.364.5700

theburkslendinggroup.com | fburks@nexalending.com