Mortgage Navigator • Non-QM Underwriting
Bank Statement Expense Factors
A lower expense factor can produce more qualifying income—but it must be supported by the actual program and documentation.
Why expense factors exist
Gross business deposits are not the same as personal earnings. Expense factors attempt to account for the cost of producing the business revenue before deriving borrower income.
One size does not fit all
A consultant, contractor, retailer and restaurant can have very different cost structures. Investors differ in whether and how they allow standard, reduced or individually documented expense factors.
Investor matrix, not a universal Non-QM rule. Bank-statement calculations, expense factors, DSCR formulas, asset haircuts, credit-event seasoning, LTV, reserves and documentation can vary materially by investor and lender. MortgageDadOf3 separates the concept from the actual program matrix so a lender overlay is not mistaken for an industry-wide rule.
Consumer-purpose loans still require the applicable consumer-protection analysis. For covered transactions, Regulation Z’s Ability-to-Repay framework generally requires a reasonable, good-faith determination of repayment ability. Alternative documentation is not the same thing as “no documentation.”
Consumer-protection references
CFPB / Regulation Z §1026.43 Ability-to-Repay · CFPB Qualified Mortgage explanation · IRS IVES transcript information