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Santa Monica attracts tech founders, consultants, and creative entrepreneurs who show strong revenue but write off everything. Traditional underwriting doesn't work when your 1040 shows $60k but you're actually clearing $300k.
This coastal market runs expensive — median condo prices push $1.2M and single-family homes often exceed $2.5M. P&L loans let self-employed borrowers qualify based on business cash flow instead of tax returns that minimize income.
Most Santa Monica buyers using P&L loans are purchasing primary residences in the $1.5M-$4M range. Your CPA-prepared financials become the income documentation instead of two years of heavily deducted tax returns.
You need 12-24 months of P&L statements prepared by a licensed CPA. Most lenders want to see consistent or growing revenue across that period — a single profitable quarter won't cut it.
Credit minimums start at 680, though some lenders go to 660 with larger down payments. Expect to put down at least 20% on primary residences and 25-30% on investment properties or second homes.
Your business structure matters less than documentation quality. LLCs, S-corps, sole proprietors all qualify if the CPA letter is solid and the P&L shows stable income that covers the mortgage payment.
P&L loans come from non-QM lenders, not banks. Rates run 1.5-3 points above conventional depending on credit, down payment, and loan amount. Expect 7-9% in current markets where conventional sits around 6.5%.
Lender overlays vary dramatically on revenue calculation. Some average 24 months of gross profit, others use the most recent 12 months, and a few allow year-to-date P&L if trending higher.
Closing takes 30-45 days because underwriters manually review financials instead of running automated income calculators. Your CPA may need to provide additional documentation or clarification letters mid-process.
Get your CPA involved early — before you even make an offer. A poorly formatted P&L kills deals. We need clean categories, consistent methodology, and a signed CPA letter on letterhead confirming they prepared the statements.
Santa Monica deals often involve multiple properties or complex business structures. If you own your office building or have partnership income from other ventures, that helps qualification but requires additional documentation.
The biggest mistake is assuming any P&L works. Lenders reject QuickBooks exports without CPA review. They also reject statements showing wildly fluctuating income month-to-month even if the annual average looks fine.
Rates vary by borrower profile and market conditions. Borrowers with 740+ credit and 30% down access better pricing tiers than those at minimum qualifications.
Bank statement loans analyze 12-24 months of deposits and calculate income from cash flow. P&L loans use CPA-prepared financials showing revenue minus expenses. Bank statements work better for cash-heavy businesses; P&L loans suit service businesses with documented expenses.
1099 loans require documented contractor income reported to you on 1099 forms. P&L loans work when you're the business owner taking distributions or showing profit that doesn't appear on a 1099 you receive.
If you're buying investment property in Santa Monica, DSCR loans might beat P&L options. DSCR ignores your income entirely and qualifies based on rental cash flow from the property itself.
Santa Monica rent control affects investment property qualification. If you're buying a rental, lenders cap rental income assumptions at actual controlled rents, not market rates. That can hurt debt-to-income calculations even with strong P&L income.
Coastal Commission restrictions limit renovation scope on some properties. If your purchase plan includes major remodeling, mention it upfront — some P&L lenders won't finance properties requiring permits they consider high-risk.
HOA fees in Santa Monica beach buildings run $800-$2,000 monthly. Those hit your debt ratios hard. A borrower qualifying for $2.5M with low HOA might only qualify for $2M in a full-service building.
No. Lenders require a licensed CPA to prepare and sign off on the statements. Bookkeeper-prepared documents get rejected immediately during underwriting review.
Most lenders require 24 months of history. A few accept 12 months for established entrepreneurs with previous business ownership and strong credit profiles.
Yes. Underwriters contact your CPA to confirm they prepared the statements and may request additional documentation or clarification on revenue categories.
Absolutely. If your spouse has W-2 income, that strengthens the application and may reduce the rate. Both income sources count toward qualification.
Methods vary. Most average 12-24 months of net profit shown on the P&L. Some add back depreciation and other non-cash expenses to increase qualifying income.
Lenders look at trends and annual performance. One weak quarter won't kill the deal if the annual average shows consistent income that covers the mortgage.
Profit & Loss Statement Loans in Santa Monica