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in Hermosa Beach, CA
Both bank statement and P&L loans solve the same problem for Hermosa Beach's self-employed borrowers. Neither requires tax returns that show artificially low income after deductions.
The real difference is how you prove income to the lender. One pulls straight from your business bank account deposits. The other relies on CPA-prepared financials.
Most self-employed beach property buyers qualify for one but not both. The right choice depends on how you run your books and what documentation you already have.
Bank statement loans use 12 or 24 months of business or personal bank statements to calculate your qualifying income. Lenders average your monthly deposits, then apply an expense ratio based on your business type.
You don't need a CPA or formal financials. Just bank statements showing consistent deposits. This works best if most of your business revenue flows through one or two accounts.
Rates start around 1-2% above conventional loans. You'll need 10-20% down depending on credit score and property type.
P&L statement loans require a CPA-prepared profit and loss statement covering 12-24 months. Your CPA must be licensed and the P&L must follow standard accounting practices.
Lenders use your net profit from the P&L to determine qualifying income. This typically works better if you already keep clean books for your business or need to show higher income than deposits alone would prove.
Rates run similar to bank statement loans, sometimes slightly lower if your P&L shows strong profitability. Down payment requirements match: 10-20% for most borrowers.
Bank statement loans look at what actually flows through your accounts. P&L loans look at what your CPA says you earned after expenses. If you write off everything, bank statements usually show higher qualifying income.
The CPA requirement is the biggest practical difference. Bank statement programs don't require one. P&L loans demand a licensed CPA who'll stake their license on your numbers.
Processing speed varies too. Bank statements are straightforward: collect PDFs, upload, done. P&L loans need your CPA to prepare documents in a specific format and sometimes answer underwriter questions.
Go with bank statements if you don't currently use a CPA, run a cash-heavy business, or show tons of write-offs on your books. Also choose this if you need to close fast and don't want to wait for a CPA to prepare formal financials.
Pick P&L if you already maintain clean books with a CPA for your business. This route makes sense when your profit margins look strong on paper or when you need to combine multiple income sources your CPA already tracks.
Some Hermosa Beach borrowers qualify for both but get better numbers one way. Run your scenario through both before deciding. Rates vary by borrower profile and market conditions.
Yes, if most business income flows through personal accounts. Lenders apply higher expense ratios to personal statements since they include non-business deposits.
No, any licensed CPA in good standing works. They just need to prepare your P&L in standard format and be willing to verify it if the lender calls.
Usually bank statements if you take lots of deductions. P&L works better if your books show strong net profit already.
Yes, but it restarts underwriting. Pick the right option upfront by running numbers both ways before you apply.
Yes, both handle primary homes, second homes, and investment properties. Down payment requirements increase for non-primary residences.