A Bank Statement loan is a mortgage where the qualifying income is calculated using the average deposits in the personal or business account of the borrower over the previous 12 to 24 months. The lender normally will deduct an expense ratio from the average deposits to calculate a net income. This loan represents a higher risk to the lender because non-traditional sources of income verification are being used. Therefore, lenders normally require at least 20% minimum down payment, 6 months reserves, and charge a higher interest rate than standard conventional loans. This loan is perfect for self-employed borrowers who do not claim a lot of income on their taxes but have a strong deposit history in their bank statements.