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in San Gabriel, CA
San Gabriel's self-employed community faces a choice when financing property: prove income through bank deposits or through a CPA's P&L statement. Both skip tax returns, but they measure income differently and attract different lender scrutiny.
Most borrowers assume P&L loans are easier because one document replaces 24 months of statements. That's backward thinking. The right choice depends on how your business runs and what your bank accounts actually show.
Bank statement loans calculate income from 12 or 24 months of business or personal account deposits. Underwriters add up your monthly deposits, average them, then apply a 50% expense ratio unless your business justifies a different percentage.
This works best when you run steady cash through your accounts and don't write off everything possible at tax time. Lenders see exactly what hits your bank. No narrative required, just consistent deposits that support the mortgage payment.
P&L statement loans let a licensed CPA create a year-to-date profit and loss statement showing your business income and expenses. The net income from that document becomes your qualifying income, usually without the automatic 50% haircut that bank statement programs apply.
You need a CPA willing to sign off on your numbers and typically provide at least one year of business history. Some lenders want to see the CPA's license and will verify they actually prepared the statement. This isn't a DIY QuickBooks export.
The core split is documentation burden versus income calculation. Bank statements mean gathering two years of pages but getting a mechanical calculation. P&L loans mean one document but finding a CPA who'll stake their license on your stated income.
Rates vary by borrower profile and market conditions, but P&L loans often price slightly higher because they rely on professional representation rather than direct cash evidence. If your bank statements show strong deposits, you'll likely get better pricing than manufacturing a P&L.
Use bank statements if you deposit most of what you earn and run a service business with low expenses. The 50% expense ratio works in your favor when your actual expenses run lower. Contractors, consultants, and cash-heavy retail businesses fit this profile.
Go P&L if your bank statements look chaotic, you operate multiple accounts, or your business carries legitimate high expenses that a CPA can document. This also works when you're ramping up income mid-year and year-to-date numbers beat your trailing 12-month average.
Yes, most bank statement programs accept personal accounts if that's where your business income flows. Underwriters look for deposit patterns, not account type.
Most lenders require a licensed CPA but don't mandate California licensure. They verify the license is active and the CPA actually prepared your P&L.
Bank statements typically close quicker because underwriters just calculate deposits. P&L loans add CPA verification steps that can extend timelines by days.
Switching restarts underwriting since the income calculation method changes completely. Pick your lane before submitting to a lender.
Loan limits depend on the lender's appetite and your qualifying income, not the documentation type. Strong income qualifies regardless of how you prove it.