New York Bank Statement Loans for Law Firms and Partner Distributions: Handling Complex Self-Employed Income

An operating manual for mortgage brokers and loan officers packaging Non QM bank statement loans for New York attorneys, firms, and partners

Search intent and audience

This guide is designed for mortgage brokers and loan officers who structure Non QM files for New York attorneys and law firm partners whose income arrives through partner distributions, guaranteed payments, draws, and irregular case settlements. The goal is to help you package deposit-driven income in a way that underwriters can reproduce in minutes. You will see how to select the right bank statement window, separate trust funds from earned fees, normalize contingent-fee spikes, and present reserves so pricing holds. The emphasis is practical. Use the language with clients and the checklists with processors to reduce conditions and maintain lock integrity.

Why bank statement mortgages fit legal practices

Law practices create clean cash flow even when tax returns look messy. Partners and solo practitioners write off case expenses, pay quarterly taxes, and often defer income until disbursement. Traditional tax return underwriting can understate capacity because it compresses income after deductions. A bank statement mortgage evaluates deposits to business or personal operating accounts and applies a documented expense factor to estimate qualifying income. That means real collections carry more weight than line-by-line tax deductions. For mechanics and intake materials, route borrowers to Bank statement mortgage and frame expectations around reproducible deposits.

Understanding New York law firm structures

New York attorneys operate through PLLCs, PCs, LLCs, or LLPs. Each structure influences paper trails. Partners in an LLP or LLC may receive guaranteed payments plus draws that flow through capital accounts. PCs and PLLCs can pay W-2 wages to owner-attorneys and issue K-1s for residuals. Your job is not to audit; it is to translate the flow. Identify which accounts receive client payments, which accounts fund payroll and case costs, and where partner draws land. A one-paragraph entity map at the front of the file saves hours downstream. When deposits cross between business and personal accounts, show the sequence clearly so reviewers can follow without guessing. When in doubt, label the accounts in your cover memo—Operating, Trust/IOLTA, Payroll, Tax, Partner Draws—and reference the exact last four digits on the statements.

What counts as revenue in legal practices

Only earned fees count. Client retainers held in trust are not income until services are performed and funds are released to operating. Expense reimbursements count only to the extent they are revenue and not pass-through costs. Third-party litigation financing proceeds do not qualify as revenue. Merchant-processor and lockbox sweeps do, provided you remove duplicates when funds are routed through multiple accounts. Underwriters exclude transfers between accounts, owner contributions, and loan advances. If a settlement check clears to operating and a distribution is paid to partners, that first deposit is the revenue; the partner distribution is not a new revenue event. Scrub the statements for duplicates to avoid overstating income. The credibility of a bank statement loan lives in clean revenue identification.

IOLTA and trust-account cautions

Trust accounts protect client funds and are sacred to bar compliance. They are also the most common complication in deposit analysis. Never present IOLTA inflows as revenue. Instead, show the movement from trust to operating once services are performed and fees are earned. A simple method works: include the page that shows the trust-to-operating transfer with a memo line, then the matching operating deposit. If memo lines are sparse, add a brief reconciliation from the firm’s bookkeeper that confirms the transfer purpose and date. If the borrower’s bank suppresses detailed transaction memos in PDFs, request CSV exports so you can annotate the match. When you demonstrate that trust funds become revenue only at release, you remove a major underwriting objection.

Mapping complex deposits across multiple accounts

Legal practices often spread activity across operating, payroll, and partner-distribution accounts. Partners sometimes receive draws into personal accounts separate from firm operating. Map the flow on a single page: list each account, the role of the account, and the statement months in your analysis. Draw arrows that show where deposits originate and where they land next. Then, create a small table with four columns: date, source, amount, and destination account. Include that table at the start of your income exhibit. An underwriter can replicate your math in minutes when the map is visible. Files that hide flows behind redacted statements or missing pages invite conditions and slowdowns.

Selecting the right statement window

Shorter windows capture current momentum; longer windows smooth spikes. In practice:
Two-month and three-month options speed file flow for firms with stable collections or for partners with recent ramp-up. They show present reality and minimize stale anomalies.
Twelve- and twenty-four-month options even out contingency cases, appellate delays, and seasonal patterns. They help partners who receive quarterly draws or episodic case distributions.
Match the window to the story. If the firm has a large one-off settlement during the chosen period, document it and show how recurring work keeps the average intact. Conversely, if a recent quarter was unusually soft due to trial prep, explain how the next quarter has signed settlements pending disbursement. The window is a lens; choose the lens that best displays capacity without stretching.

Expense factors for professional services

Non QM programs apply an expense factor to business deposits to estimate net income. Service firms like law practices carry lower cost of goods and higher fixed overhead, which often supports a more favorable factor than retail or manufacturing. Strengthen your factor with documentation. Provide payroll journals, rent statements, malpractice premium receipts, and a CPA letter that describes the firm’s typical expense load and confirms that deposits represent gross business receipts. If multiple partners practice in the same entity, clarify the borrower’s ownership percentage so the income model reflects only their share. When a partner is paid through guaranteed payments and profit distributions, explain both streams, then align your bank statement math to the stream that best demonstrates continuity.

Normalizing contingency and lump-sum fees

Litigation practices generate lumpy inflows. Instead of defending the spike, explain it. A short paragraph can anchor the narrative: date of settlement, share of fees earned, and whether case expenses were netted before or after the deposit. If the month with the spike is an outlier in a two-month window, consider a longer window so the average is representative. If the spike created a run-up of cash in the operating account, present a reserve map and show how much remains after closing. Underwriters accept episodic wins when the deposit math is paired with a credible pipeline of routine matters such as hourly, flat-fee, or recurring corporate work. Underwriting is about predictability. Your narrative turns volatility into a pattern.

Handling partner distributions and capital draws

Partner distributions can be monthly, quarterly, or at year-end. Document the cadence. Provide K-1s if available, a capital-account statement showing beginning and ending balances, and a simple draw schedule from the firm’s bookkeeper or controller. When draws vary, the question becomes continuity: will distributions at least match the income implied by your bank statement model. Answer that question by showing a twelve-month history of partner draws, or by providing an operating agreement excerpt that explains how net profits are allocated. If a partner took a large true-up in one month, show that it is a periodic event, not the only source of income. If guaranteed payments exist, those act like baseline income. Draws sit on top. Together they create stability even when case work swings.

Excluding non-revenue inflows cleanly

Your analysis will be challenged if non-revenue remains in the deposit stream. Remove intra-account transfers, owner contributions, credit-line draws, personal transfers from family members, and refunds unrelated to revenue. If the firm uses a lockbox or merchant-processor that sweeps into operating, keep only the final landing deposit in your count. The simplest technique is a redline copy of each statement page: highlight the deposits you count and strike through the ones you exclude with a one-word reason. Upload the clean PDF and the annotated version. This transparency invites trust and faster approvals.

Documents that speed clear-to-close

Build a simple stack and stick to it. Full PDFs of the chosen bank months with all pages, including blanks. A voided check or header page that shows the account holder name and last four digits. Payroll journal summaries if the firm has employees. Malpractice and office lease invoices to support expense factors. A CPA letter that describes the business, confirms deposit treatment, and notes ownership shares. If contingency cases are material, include case-status summaries with minimal client details—matter type, filed date, expected disbursement window. Add a one-page income math summary that shows total deposits, excluded items, expense factor, and resulting qualifying income. Launch intake through Get a Non-QM quick quote to set expectations and gather documents in the right format on day one.

Collateral, occupancy, and product fit

Most attorney files are primary occupancy or second homes, but investor properties appear as partners diversify. Keep lanes clear. Use the bank statement mortgage to qualify personal housing. For investment collateral where cash flow stands on its own, pivot to a coverage route. The Investor DSCR loan page helps sponsors understand coverage math when needed. For cross-border partners with assets abroad, or for co-counsel who recently moved to New York, share Foreign National mortgage options to frame identity and funds-movement expectations.

Loan structure strategies for attorneys

Legal calendars create income timing. Choose structures that respect that. Interest-only (when eligible) can align with active trial quarters and convert to amortization after expected disbursements. Hybrid ARMs reduce early payments while the firm replenishes cash after tax deadlines or large expense outlays. If a partner expects a distribution in a set quarter, align lock periods and closing dates to avoid avoidable extension fees. Present a reserve plan in months of PITIA that survives a quiet quarter. Underwriters want to see that the borrower can carry the payment without forcing a capital call from the firm. Structure is not about chasing the lowest rate; it is about certainty of execution without stress.

Risk layering and mitigants

Non QM welcomes complex income, but you should not stack every risk. If leverage is high, strengthen reserves. If deposit volatility is large, widen the bank statement window or include a CPA letter and a pipeline exhibit. If credit is thin due to a recent tax lien or late, present a clean resolution and thick liquidity. Your cover memo should name the risks plainly and present offsets. Decision makers move faster when you demonstrate control and realism.

Compliance and ATR logic in Non QM

Ability-to-repay still rules. Funds to close must be sourced and seasoned. Large transfers require a paper trail. If the firm advances case costs on a line of credit, keep those advances out of qualifying deposits and show that the facility is current and modest relative to revenue. If the borrower uses business accounts for reserves, include the operating agreement and a preparer note that confirms access without impairing operations. Name consistency across bank statements, K-1s, operating agreements, and the application matters. Underwriting friction often begins with mismatched names, initials, or entity styles. Clean those before you upload.

New York location notes for local SEO

New York closings rely on attorneys and detailed building packages, which shapes your timeline. In New York City, co-ops require board packages that assess debt-to-income, post-closing liquidity, and professional stability. Even when the lender approves, the board must approve as well. Co-ops publish their own financials and house rules; request the most recent audited statements and sublet policies early to understand future options. Condos rely on questionnaires, budget reviews, and building insurance certificates. In Manhattan and Brooklyn, taxes and common charges can rival the mortgage payment; verify them up front. In Queens and the Bronx, smaller condos sometimes hold master policies with higher deductibles; reflect that in insurance quotes. On Long Island (Nassau and Suffolk), single-family and HOA communities introduce assessments and flood zones; quote wind and flood if applicable. In Westchester and the Hudson Valley, property taxes vary by town and school district; use post-purchase estimates rather than the seller’s old bill. Upstate metros like Albany, Rochester, Syracuse, and Buffalo balance lower purchase prices with older housing stock; include recent upgrades and energy costs in your payment narrative. Your intake script should ask: co-op or condo, attorney selected, building contact, and whether a managing agent or sponsor will deliver the questionnaire.

Co-ops vs condos vs single-family nuances

Co-ops add a layer of approval and often require post-closing liquidity expressed as a multiple of monthly housing costs. Set expectations that board standards are separate from lender standards. Some co-ops restrict subletting; if the borrower anticipates renting in the future, confirm rules before contract. Condos require fewer approvals but still need a completed questionnaire and adequate reserves in the building budget. Single-family homes are faster from a building-document standpoint, but taxes and insurance in New York can swing payment more than expected. Whatever the property type, ask for the offering plan or the most recent amendment if the building is newer. Proactive document requests make your DSCR or bank statement math believable because PITIA inputs are real.

Appraisal expectations and building packages

Provide appraisers with a packet: the executed contract, access notes, recent upgrades with invoices, and, for condos and co-ops, the building questionnaire contact. If the property faces heavy street noise or has unique views, include notes that explain pricing relative to comps. For co-ops, appraisers rely heavily on building financial health; a recent audited statement speeds analysis. For townhouses and single-family homes, include utility cost estimates—steam, oil, gas—so the payment narrative reflects reality. An appraiser who receives a complete packet is less likely to call for clarifications, which keeps your clock moving.

Reserves and liquidity mapping

Reserves are the easiest compensating factor. Present them as months of PITIA so decision makers can compare apples to apples. Separate funds to close from reserves and avoid double counting. If reserves are spread across business and personal accounts, list both and include the authority to draw from business funds without impairing operations. Partners who receive episodic distributions can park a portion of a recent draw to seed reserves. Show that path cleanly. If retirement accounts are included, provide the statement and a note on access terms. A simple reserve map—account name, balance, amount allocated to closing, remainder converted to months of PITIA—removes guesswork and steadies pricing.

Underwriting walk-through: turning deposits into income

Consider a Midtown solo practitioner who takes both hourly work and a contingency docket. Operating-account deposits over the last twelve months average fifty-two thousand dollars per month after removing transfers and reimbursements. With a documented expense factor of forty percent appropriate for a service firm with modest staff, qualifying income is thirty-one thousand two hundred dollars per month. The target housing payment (PITIA and HOA) is fourteen thousand two hundred dollars on a jumbo condo. Debt service coverage on personal housing is not the metric, but the ratio of qualifying income to housing cost shows margin. The file also includes twelve months of recurring draws to the partner’s personal account and a current reserve map equal to twelve months of PITIA after closing. A CPA letter confirms that deposits represent gross business receipts and explains case-expense treatment. This paragraph gives the reviewer confidence that income is reproducible and that liquidity protects against quiet months.

Merchant processors, software, and evidence trails

Many New York practices use Clio Payments, LawPay, Stripe, or firm-specific lockboxes. Explain how processor batches settle and how those batches appear in operating accounts. Provide one month of processor reports that align to the bank PDF for the same month. If trust and operating are both connected to the processor, label them clearly and show that IOLTA batches are excluded from revenue. When ACH settlement descriptors are ambiguous, use the gateway’s transaction IDs to tie the trail from client payment to operating deposit. A single-page legend that decodes the gateway’s memo lines can prevent hours of back-and-forth during underwriting.

Case-expense reimbursements and cost advances

Litigation and contingency work often involve cost advances by the firm. When settlements arrive, reimbursements flow back to operating. These inflows are not revenue. In your redline, note “expense reimbursement” next to those deposits and remove them from the revenue total. If the firm carries a separate case-cost account or line of credit, provide the latest statement to show the balance and its relationship to operating cash flow. Underwriters are comfortable when they see that reimbursements are non-revenue and that the facility is modest relative to gross receipts.

Capital accounts, K-1 timing, and distribution seasonality

Partners in New York firms often see K-1s delivered late in the tax year, with distribution true-ups in Q1 or Q2. This timing can confuse a short bank-statement window if the file lands between true-ups. Solve this by pairing a 12- or 24-month window with a simple timeline that lists quarter-by-quarter draws and true-ups. If ownership percentage changed, include the effective date and the new capital-account baseline. Clarity on timing converts what looks like volatility into an understandable cadence of earnings.

Two sample narratives that underwriters replicate quickly

Boutique PLLC in Brooklyn. Two-attorney firm, contingency and hourly mix, uses LawPay to operate, IOLTA for retainers. Twelve-month bank analysis removes IOLTA inflows and reimbursements, average gross deposits forty-five thousand per month, expense factor forty-two percent, qualifying income twenty-six thousand one hundred. Partner receives monthly guaranteed payment and quarterly draw; reserve map equals nine months PITIA. Co-op purchase in Park Slope with board liquidity requirement of two years’ housing costs met through brokerage accounts.

Large LLP partner on the Upper East Side. Primarily corporate advisory with quarterly distributions and year-end true-up. Merchant flows minimal; invoices paid via wire. Twenty-four-month analysis smooths a large prior-year true-up. Expense factor thirty-eight percent due to lean staff and high billable rate. Condo purchase with HOA and taxes verified against the building budget and tax bills; reserve plan at twelve months PITIA, including retirement accounts with documented access terms.

Common red flags in legal-practice deposits and easy cures

Trust-to-operating transfers missing memo detail. Cure with a bookkeeper note and a screenshot of the trust ledger for the transfer date.

Duplicate counting of processor batches and operating deposits. Cure by keeping only the final landing deposit.

Owner cash infusions during soft quarters counted as income. Cure by labeling as owner contribution and excluding from revenue.

Mixed personal and business activity on the same account. Cure by carving out business deposits only and including a statement from the CPA acknowledging mixed-use and supporting the separation method.

Team workflow from Quick Quote to CTC

Open with Get a Non-QM quick quote to capture account lists and the preferred statement window. Request full PDFs and optional CSVs. Build the entity map, deposit map, and redlined statements. Draft the income summary with the expense factor rationale and ownership share. Insert New York property-type specifics—co-op liquidity, condo budgets, building insurance contacts. Align structure to the client’s calendar and expected distributions. Submit a file that reads like a story: who they are, how money comes in, what you counted, why it’s durable, and how the payment fits with reserves. Credit teams accelerate when the narrative is simple and the numbers are reproducible.

Broker talk tracks for attorneys and firm CFOs

Lead with clarity: “This approval is deposit-driven, not tax-return-driven. We will scrub your operating statements, remove non-revenue, apply an expense factor, and document a reserve plan that survives a quiet quarter.” Reframe rate talk to approval durability and timeline control. Promise specific deliverables: full PDFs of the chosen months, CSV exports if memos are missing, a one-page source map, and a cover memo that tells the income story. Attorneys and CFOs respond to process and reproducibility. When they see you own the narrative, they give you cleaner documents faster.

FAQ to preempt conditions

Can trust-account flows qualify. No. IOLTA deposits are not income until released to operating as earned fees. Provide the trust-to-operating transfer evidence and count the operating deposit.

What about retainers? Retainers held in trust do not count until earned and moved to operating. If retainers are deposited directly to operating, provide engagement terms that explain billing against retainers so the deposit is clearly earned.

How do merchant-processor payouts show up? Use the settlement report to tie processor batches to operating deposits and avoid double counting if a sweep hits more than one account.

Can mixed W-2 and K-1 income fit? Yes. Align the bank statement model to the dominant stream and use W-2s to show baseline continuity.

Do co-ops require more reserves? Often yes. Board rules vary by building. Confirm post-closing liquidity requirements with the managing agent at intake.

How long should the statement window be? Choose the shortest window that is representative and reproducible. When volatility is high, use twelve or twenty-four months to smooth spikes.

Internal links and calls to action

Move clients from interest to action with clear next steps. Start intake through Get a Non-QM quick quote so you capture the account list, statement months, and the CPA contact on day one. Teach mechanics with Bank statement mortgage. Keep Investor DSCR loan handy when an attorney wants to place an investment unit under a coverage path rather than personal income. For cross-border ownership or offshore assets, reference Foreign National mortgage options. Reinforce brand authority by positioning NQM Funding as a trusted Non QM Loans partner that thrives on complex self-employed income when the documentation is clean and reproducible.