Last spring your account took in a six-figure draw on Monday and paid out most of it to suppliers and subs by Friday. Winter was slow, then summer was slammed. Your tax return shows a modest number after depreciation on the trucks and equipment. If that sounds familiar, getting a mortgage for contractors can feel like explaining your business to someone who's never swung a hammer.
The good news: plenty of lenders understand construction cash flow. The key is choosing the documentation path that reflects what you actually keep, not just what passes through your account.
Key takeaways
- Contractor deposits are often large and lumpy because of draws, deposits and materials pass-through, which can make bank statement income look higher or lower than reality.
- The expense factor a lender applies matters a lot for trades businesses; a CPA letter documenting your real expense ratio may help or may raise it.
- Equipment and truck loans that report on your personal credit may count in your DTI unless the business is documented as paying them.
- Seasonality is normal; a 24-month bank statement window can smooth out slow seasons.
- P&L-based loans can be a better fit when your books are clean but your deposits are distorted by pass-through money.
Why contractor income confuses lenders
Most lenders were built around W-2 paystubs. Construction businesses break every assumption that model relies on.
Draw-based, lumpy deposits
General contractors and remodelers often get paid in draws tied to project milestones. A month with two draws looks huge; a month between jobs may show almost nothing. Underwriters reviewing bank statements will see that pattern and ask about it.
Materials pass-through
When a client pays you for a kitchen remodel, a big chunk of that money goes straight to cabinets, countertops and fixtures. It lands in your account as a deposit but was never really yours. That inflates gross deposits, which matters because bank statement loans start with deposits.
Subcontractor payments
Many GCs pay subs for a large portion of the work. Again, money flows in and right back out. Some lenders look at outflows; most simply apply an expense factor to deposits.
Seasonality
Roofers, landscapers, pool builders and exterior trades often have clear busy and slow seasons. Twelve months of statements might catch your best stretch or your worst.
Heavy write-offs
Trucks, trailers, tools, equipment, fuel, insurance and depreciation all reduce taxable income. That's good for your tax bill and bad for conventional qualifying. Our guide to how tax write-offs affect a mortgage explains the mechanics.
Bank statement loans for contractors
A bank statement loan qualifies you based on 12 or 24 months of deposits instead of your tax returns. For contractors, the critical variable is the expense factor.
Why the expense factor matters so much
Many lenders apply a standard expense factor to business bank statements, often somewhere around 50%, to estimate what you keep. Some allow a different factor if your CPA or tax preparer documents your actual expense ratio.
Here's the catch for trades businesses: because of materials and subs, your real expenses may be higher than a standard factor assumes. In that case:
- A standard factor may actually overstate your income relative to reality, which works in your favor on qualifying but means you should be confident you can comfortably afford the payment.
- A CPA letter documenting a lower expense ratio only helps if your expenses are genuinely lower, as in a labor-only or service-heavy trade.
- Some lenders may apply a higher factor for certain industries or ask questions if the deposits look inconsistent with the business type.
Read our deep dive on the bank statement loan expense factor before you pick a path.
12 vs. 24 months for seasonal trades
If your last 12 months include a slow winter and a project delay, a 24-month window may give a fairer average. If business has grown sharply, 12 months may look better. Pricing and availability can differ between the two. Our comparison of 12 vs. 24 month bank statement loans walks through the decision.
A worked example: a remodeling GC
Illustrative example — not an offer or a guarantee of qualifying income.
Take a hypothetical remodeling contractor with an S-corp. His tax return shows $82,000 of net income after depreciation and vehicle expenses.
His business bank account shows $1,680,000 in eligible deposits over 24 months.
| Method | Calculation (illustrative) | Monthly qualifying income |
|---|---|---|
| Tax returns | $82,000 ÷ 12 | about $6,833 |
| Bank statements, standard 50% factor | $1,680,000 ÷ 24 = $70,000; × 50% | $35,000 |
| P&L (CPA-prepared, materials and subs fully expensed) | Net profit of $480,000 over 24 months ÷ 24 | $20,000 |
Notice that the P&L shows less income than the bank statement method because it reflects the true cost of materials and subs. Neither number is "the" answer. The lender's guidelines decide which calculation applies, and you should qualify on a payment you're comfortable with. Our comparison of a P&L loan vs. a bank statement loan explores when each wins.
Big deposits, bigger write-offs? We'll run your numbers through bank statement and P&L methods so you can see which fits. See if you qualify →
P&L loans for contractors
A profit and loss loan uses a P&L prepared or reviewed by a CPA, enrolled agent or tax preparer. For contractors with good bookkeeping, this can be the cleaner choice because:
- It separates pass-through materials and subcontractor costs from true profit
- It doesn't depend on the timing of draws in a given month
- Mixed accounts or frequent transfers matter less
Some lenders pair the P&L with a few months of bank statements to confirm the revenue is real. If your books live in QuickBooks and your CPA reviews them, this path is worth a look.
Truck, equipment and business debts
Contractors often finance trucks, trailers, skid steers and other equipment. How those loans affect your mortgage depends on where they report:
- Reports on your personal credit, paid by the business: Many lenders will exclude it from your DTI if you show the business has made the payments, typically with business bank statements, for a period the lender specifies.
- Reports on your personal credit, paid personally: It counts in your DTI.
- Business-only debt (not on your personal credit): Usually not counted in personal DTI, though bank statement lenders may see the payments in your statements.
Lines of credit used for materials can also show up. Our guide to whether business debt counts on a mortgage covers what documentation lenders typically want.
Documents contractors should gather
- 12 or 24 months of business bank statements (all pages, all accounts used for business)
- Proof of business ownership and history: contractor license, state filing, CPA letter
- CPA- or preparer-prepared P&L, if going that route
- A list of equipment and truck loans, with proof the business pays any that report personally
- Explanations for unusually large deposits, such as a draw schedule or contract
- Asset statements for down payment and reserves
- Liability insurance or bonding documents, if the lender asks to verify the business
Our bank statement loan documents checklist has a printable version.
Tips to strengthen your file
- Separate business and personal accounts. Clean statements are easier to underwrite.
- Label large deposits. Keep a simple log tying big deposits to invoices or draw requests.
- Avoid cash deposits you can't document. Undocumented cash may be excluded.
- Don't finance a new truck right before applying. New debt can change your DTI.
- Talk to your CPA early about your P&L and whether a CPA letter is appropriate.
- Keep reserves liquid. Money tied up in equipment doesn't count as reserves.
Frequently asked questions
Q: Can a contractor get a mortgage without tax returns?
A: Many non-QM lenders offer bank statement and P&L programs that qualify self-employed contractors without using tax returns for income. Requirements, pricing and availability vary by lender and your profile.
Q: How do lenders handle materials pass-through on bank statements?
A: Most bank statement programs apply an expense factor to deposits rather than tracking each outflow. Because materials and sub costs can be high, it's worth comparing bank statement and P&L methods to see which reflects your income more accurately.
Q: Does my truck loan count against me?
A: If it reports on your personal credit, it may count in your DTI unless you show the business has been paying it. Lenders usually want business bank statements as proof.
Q: I'm seasonal. Will slow months hurt me?
A: Seasonality is common, and lenders see it all the time. A 24-month bank statement window can smooth out slow periods. Be ready to explain any unusually long gap between jobs.
Q: Should I use a 12-month or 24-month bank statement loan?
A: It depends on your trend and seasonality. If business has grown, 12 months may help; if the last year included a slowdown, 24 months may give a fairer picture. Pricing may differ between them.
Ready to build your own place for a change?
You've built homes, decks and roofs for other people. Getting a mortgage on yours shouldn't require turning your bookkeeping upside down.
Matador Lending works with 150+ wholesale lenders, including many that understand contractor cash flow. We'll compare how each one treats your deposits and debts and tell you honestly which path makes sense.
See if you qualify → — no credit pull to check your options. Prefer to talk? Call or text 713-366-4668.
This article is general education, not tax, legal, or financial advice, and not a commitment to lend. Loan programs, guidelines, and availability vary by lender and state and change without notice. Non-QM loans are subject to credit approval, income and asset verification, and appraisal. Talk with your CPA about tax questions. Small Business Mortgages is a marketing brand of Matador Lending, NMLS #2072896. Equal Housing Opportunity.