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in Monterey Park, CA
Both bank statement and P&L loans serve self-employed borrowers in Monterey Park who can't use W-2s to prove income. The key difference is what documentation you submit and how lenders calculate your qualifying income.
Most business owners qualify for one option faster than the other. Your choice depends on how you manage your business finances and what paperwork your CPA already maintains.
Bank statement loans use 12 or 24 months of personal or business bank deposits to calculate income. Lenders average your monthly deposits and apply an expense factor, typically 25-50% depending on your business type.
You skip the CPA requirement entirely. Many Monterey Park business owners prefer this route because they already have bank statements on hand and avoid the cost of preparing formal financials.
Rates typically run 1-2% higher than conventional loans. Expect minimum credit scores around 620-640 and down payments starting at 10-15% depending on the lender.
Profit and loss statement loans require a CPA-prepared P&L covering 12-24 months of business activity. Some lenders also want a balance sheet and a signed CPA letter verifying the numbers.
Income calculation uses your net profit after expenses. This gives you more control over qualifying income if your CPA structures your books strategically, but the preparation cost runs $500-2,000 depending on complexity.
Rates mirror bank statement loans at 1-2% above conventional. Credit and down payment requirements are similar, though some lenders offer slightly better terms if your P&L shows strong consistent profit.
The documentation gap is the biggest split. Bank statement loans pull straight from your existing accounts while P&L loans need formal financials your CPA creates specifically for the mortgage application.
Income calculation differs drastically. Bank statements use gross deposits minus a standard expense ratio, while P&L loans use your actual reported net profit. If you write off aggressive expenses, bank statements usually qualify you for more.
Timeline and cost favor bank statements. You can pull statements online in minutes versus waiting weeks for CPA-prepared documents and paying preparation fees.
Choose bank statement loans if you don't already maintain formal CPA-prepared books or if heavy business deductions shrink your net profit. Most Monterey Park restaurant owners, contractors, and retail operators qualify faster this way.
Go with P&L loans if your CPA already prepares annual financials for tax purposes and your net profit is strong. Professional service providers like doctors or consultants with high profit margins often prefer this route.
Many borrowers try bank statements first since the documentation is immediate. If deposits don't qualify you high enough, a P&L loan becomes the backup option assuming your reported profit supports the purchase price.
Yes, most lenders accept business accounts. Some borrowers combine both personal and business statements to maximize qualifying income.
CPAs licensed in any state work for P&L loans. The key requirement is they're an active CPA or licensed tax preparer, not their location.
Yes, both support cash-out refis. Expect slightly higher rates and lower max LTV compared to purchase transactions.
Bank statement loans typically qualify borrowers 15-30% higher if you carry significant business deductions. Run both calculations to compare.
Yes, though it restarts underwriting. Most brokers analyze both options upfront to avoid delays once you're in process.