Loading
in Diamond Bar, CA
Self-employed borrowers in Diamond Bar face a choice: prove income with bank statements or P&L statements. Both are non-QM options designed for business owners who can't show traditional W-2 income.
The right choice depends on how you run your books and what documentation you already have. Most borrowers default to bank statements because they're simpler to pull together.
Bank statement loans use 12 or 24 months of personal or business bank deposits to calculate income. Lenders apply a percentage (usually 50-75%) to your average monthly deposits to determine qualifying income.
This works best if you run significant revenue through your accounts and don't write off every possible expense. You'll need consistent deposits without huge month-to-month swings.
Most lenders want 10-20% down and credit scores above 620. Rates run 1-2% higher than conventional because it's a non-QM product with more lender risk.
P&L loans require a CPA-prepared profit and loss statement covering 1-2 years. Some lenders also want a balance sheet. Your accountant signs off on the numbers, which becomes your verified income.
This route makes sense if you already work with a CPA and have clean books. The P&L shows your actual business profit without the deposit noise that bank statements include.
Down payment and credit requirements mirror bank statement loans: 10-20% down, 620+ credit. Rates are comparable since both fall under non-QM pricing.
The core split: bank statements show cash flow, P&L statements show profit. If you deposit $30k monthly but write off $20k in expenses, a P&L shows $10k profit while bank statements might qualify you on $15k-$22k.
Bank statement loans are faster to document — you download statements and submit. P&L loans need a CPA to prepare formal financials, which adds time and cost if you don't already have them.
Income calculation differs too. Bank statements use a flat percentage of deposits. P&L loans use your bottom-line profit, which can work for or against you depending on how aggressively you depreciate.
Choose bank statements if you don't have a CPA relationship and your deposits are steady. This works well for contractors, consultants, and service businesses with simple operations.
Go with P&L if you already file detailed financials and your profit margins look strong on paper. Real estate agents, medical professionals, and established business owners often prefer this route.
In Diamond Bar's market, I see more borrowers use bank statements because it's the path of least resistance. But if your CPA already prepares monthly P&Ls, use them — you'll likely qualify for more house.
No, lenders pick one income documentation method. You can't combine them to boost qualifying income.
Rates are nearly identical since both are non-QM products. Your credit score and down payment matter more than documentation type.
Yes, most lenders want 24 months in the same business or industry. Some accept 12 months with strong compensating factors.
Large swings hurt bank statement loans. A P&L smooths out those bumps by focusing on annual profit instead of monthly cash flow.
Yes, but it restarts underwriting. Choose your documentation method before applying to avoid delays.