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in Los Angeles, CA
Los Angeles self-employed borrowers have two main paths to prove income without tax returns. Bank statement loans use 12-24 months of deposits. P&L loans rely on CPA-prepared financials.
Both are Non-QM products built for business owners, freelancers, and gig workers. The right choice depends on how you run your books and what your bank accounts show.
Bank statement loans pull your income straight from 12 or 24 months of business or personal account deposits. Underwriters calculate average monthly deposits, then apply an expense ratio (usually 25-50%) to estimate net income.
This works well if you run most revenue through your accounts but write off heavily on taxes. You don't need a CPA or formal P&L. The lender just needs clean, consistent deposits that support your stated income.
Most programs accept personal accounts, business accounts, or both. Some even allow multiple accounts combined. Down payments typically start at 10-15%, with credit score minimums around 620-660.
P&L loans require a CPA-prepared profit and loss statement covering 12-24 months. The CPA must be licensed and unrelated to you. Their signature validates your business income without needing full tax returns.
This path works if you keep formal books and have a CPA relationship already. Underwriters use the net income shown on your P&L. No arbitrary expense ratios get applied—your actual reported profit drives qualification.
You'll still provide bank statements for reserves and down payment verification. But income comes from the P&L itself. Credit and down payment requirements mirror bank statement programs—typically 10-20% down and 620+ credit.
Bank statement loans let you skip the CPA and use raw deposits. P&L loans require formal accounting but avoid arbitrary expense assumptions. If your deposits look strong but your books are messy, go bank statements. If you keep clean records with a CPA, P&L loans reflect your true income.
Income calculation is the biggest split. Bank statement lenders assume 50-75% of deposits are income after expenses. P&L lenders use the actual net profit your CPA reports. This can swing qualification significantly depending on your real expense ratio.
Neither requires tax returns, but P&L loans need third-party verification through a licensed CPA. Bank statement loans skip that step entirely. Processing timelines are similar—both close in 30-45 days with the right paperwork.
Choose bank statement loans if you don't have a CPA, keep informal books, or your deposits show more income than your P&L would. This fits most freelancers, contractors, and small operators who run lean on paper but deposit well.
Choose P&L loans if you maintain formal accounting, work with a CPA, and your net profit accurately reflects income. This works for established businesses with clean books where the real numbers support your loan amount better than deposit averages would.
In Los Angeles, we see both work for the same borrower price range. The choice comes down to documentation readiness, not property type. If you're unsure, pull 12 months of statements and compare deposit averages to your actual net income. The bigger number usually wins.
No, lenders use one income method per loan. You pick the approach that shows higher qualifying income for your situation.
Rates are nearly identical since both are Non-QM products. Your credit score and down payment matter more than documentation type.
Not always. Bank statement loans rarely require it. P&L loans may ask for business verification depending on the lender.
Most programs use 12 months. Some allow 24-month averaging if it helps your income calculation.
No. Lenders require a licensed CPA signature. Bookkeepers and accountants without CPA credentials don't qualify.