Quick Summary: If you're a self‑employed West Palm Beach business owner whose tax returns don’t reflect your true income due to write‑offs, a bank statement loan may offer the smoothest path to approval. If your documented income is strong and consistent, a conventional loan will usually offer lower rates and simpler long‑term costs. In Palm Beach County—where many entrepreneurs reinvest heavily into their businesses—choosing the right loan often depends on how your income appears on paper. CTC Mortgage helps borrowers compare both options based on documentation, pricing, and qualification strength.

Understanding the Two Loan Types

Both loan options are widely used by self‑employed buyers in West Palm Beach, but they evaluate income differently. A conventional loan uses tax returns, while a bank statement loan uses cash flow from your bank accounts. The right choice depends on how you manage your business and how much income you report for tax purposes.

Documentation Differences

Bank Statement Loans

• Use 12 or 24 months of bank statements instead of tax returns
• Income is based on deposits, not taxable income
• Flexible enough for entrepreneurs with large write‑offs
• Can use business or personal statements depending on income flow

Conventional Loans

• Require two years of tax returns
• Income is calculated after business deductions
• Stricter debt‑to‑income and documentation requirements
• Lower overall cost if you qualify cleanly

How Income Is Calculated

Bank Statement Loan Income Formula

Lenders total up your monthly deposits, remove transfers, and apply an expense factor (commonly 30%–50% for business accounts). This gives a more realistic snapshot of your actual earning capacity—particularly helpful for West Palm Beach business owners who reinvest profits, use write‑offs, or have irregular income patterns.

Conventional Loan Income Formula

Conventional underwriting uses taxable income after all deductions. If your business write‑offs reduce net income, it may significantly limit the loan amount you can qualify for—even if actual revenue is strong.

Why Some Borrowers Choose Bank Statement Loans Despite Higher Rates

Bank statement loans often have slightly higher interest rates because they fall under non‑QM (non‑traditional) lending. However, many Palm Beach County entrepreneurs choose them because:

• The income calculation reflects real cash flow, not reduced taxable income
• They avoid the complexity of explaining business deductions
• They allow faster approvals when tax returns don’t tell the full story
• They provide more flexibility for business owners with fluctuating revenue

CTC Mortgage helps borrowers weigh the small rate difference against improved purchasing power and a smoother approval process.

When a Conventional Loan Is the Better Fit

Choose conventional financing if:

• Your tax returns show strong net income
• You want the lowest possible interest rate
• You have stable income and minimal write‑offs
• You prefer standardized underwriting that may offer faster closing

When a Bank Statement Loan Makes More Sense

Choose a bank statement mortgage if:

• Your taxable income is low due to deductions
• Your business has high gross revenue
• You want to avoid extensive tax‑return underwriting
• Your income varies seasonally or depends on client payments

Explore Both Options with CTC Mortgage

Learn more about these programs here:

• West Palm Beach Bank Statement Loans
• West Palm Beach Conventional Loan Guide

Need Help Deciding Which Loan Works for Your Business?

CTC Mortgage works with self‑employed buyers across West Palm Beach and Palm Beach County to compare both loan types using real income scenarios. Our team can help you understand how much you qualify for under each method—and which path aligns best with your financial goals.