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in Pasadena, CA
Most self-employed borrowers in Pasadena hit the same wall: their tax returns show minimal income after write-offs. Both bank statement and P&L loans solve this by using alternative documentation to prove cash flow.
The difference comes down to how you track income and what documentation you already have. One uses raw deposits, the other needs a CPA's signature.
Bank statement loans use 12 to 24 months of business or personal bank statements to calculate income. Lenders average your deposits and apply an expense factor—usually 25% to 50%—to estimate qualifying income.
You don't need a CPA or formal financials. Just provide consecutive bank statements showing consistent deposits from your business activity.
Most lenders require 10% to 20% down and accept credit scores as low as 620. Rates typically run 1% to 2% above conventional conforming loans.
P&L statement loans use a CPA-prepared profit and loss statement—typically covering 12 to 24 months—to document income. The CPA must be licensed and sign off on the numbers.
This route works best if you already work with a CPA for your business. The lender may also request a balance sheet and business bank statements to verify the P&L figures.
Credit and down payment requirements mirror bank statement loans: 10% to 20% down, 620+ scores. Rates vary by borrower profile and market conditions.
The core split: bank statement loans look at raw deposits, P&L loans look at net profit. If you write off everything and show minimal profit, bank statements usually produce higher qualifying income because they count gross deposits.
P&L loans require an existing relationship with a CPA. Bank statement loans don't—you just pull PDFs from your online banking and submit them.
Some lenders prefer P&L statements because they're third-party verified. Others like bank statements because they're harder to manipulate and show real cash movement.
Choose bank statement loans if you don't use a CPA or if your P&L shows minimal profit due to legitimate write-offs. Most self-employed borrowers in Pasadena go this route because it's simpler and often qualifies them for more.
Go with P&L loans if you already have a CPA preparing financials and your net profit supports the loan amount you need. This works well for established businesses with clean books.
Either way, you're proving income without tax returns. The question is whether you want to prove it with deposits or with a CPA's math.
You can use either. If deposits mix business and personal funds, lenders apply a higher expense ratio to account for non-business transactions.
No, any licensed CPA works. They just need to be in good standing and willing to sign the statement.
Rates are similar for both—usually 1% to 2% above conventional. Lender pricing depends more on credit score and down payment than documentation type.
Yes, if you can produce the required documents. Most brokers will run both scenarios upfront to see which qualifies you for more.
Most lenders want 12 to 24 months. Longer history sometimes helps if recent months show income dips.