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in South Pasadena, CA
South Pasadena's self-employed buyers face the same problem: strong income, weak tax returns. Traditional lenders reject deals that would easily close with alternative documentation.
Bank statement loans and P&L loans solve this differently. One uses deposit patterns, the other uses accountant-certified earnings. The right choice depends on how your business runs and what your CPA will sign off on.
Bank statement loans calculate income from 12 or 24 months of deposits. Lenders average your total deposits and apply an expense ratio—typically 25% to 50%—to estimate what you actually keep.
This works for any self-employed borrower with consistent deposits. No CPA letter required. Just business or personal bank statements showing regular cash flow into your accounts.
Rates run 0.50% to 1.00% higher than conventional loans. Expect 10-20% down minimum. Credit scores below 680 push rates higher and limit your lender options.
P&L loans use a CPA-prepared profit and loss statement to document income. Your accountant writes a letter certifying the numbers. Lenders verify the CPA's license and use those certified earnings for qualification.
This route works if your CPA will certify higher income than your deposits show. Some businesses reinvest heavily or show erratic deposits but strong certified profits.
Rates typically match bank statement loans—0.50% to 1.00% above conventional. Down payment minimums run 10-20%. Your CPA must hold an active license and prepare the P&L in the proper format.
The core difference is documentation. Bank statement loans look at what actually hits your account. P&L loans trust what your CPA certifies on paper.
If you show consistent deposits and simple business structure, bank statements work faster. If your business parks cash in inventory or shows lumpy deposits, a P&L might qualify you for more.
Bank statement loans move quicker because underwriters just analyze statements. P&L loans add a step—verifying your CPA's credentials and reviewing the certified financials. Both take longer than W-2 deals but close reliably with clean documentation.
Choose bank statements if you show steady deposits and don't want CPA involvement. This works for consultants, contractors, and anyone with straightforward cash flow hitting the same accounts monthly.
Go with P&L if your deposits look inconsistent or your CPA can certify higher income than your statements reflect. Also smart if you already have current P&L statements prepared for other business purposes.
South Pasadena buyers closing self-employed deals need brokers who know which lenders accept which documentation. Some portfolio lenders prefer bank statements. Others want CPA letters. We shop both routes and tell you which one gets you the best terms.
No. Lenders require one method or the other, not both. Pick the approach that shows your strongest income position.
Most lenders still request returns for verification but don't use them for income calculation. The CPA-certified P&L determines your qualifying income.
Rates are nearly identical—both run 0.50% to 1.00% above conventional. Your credit score and down payment matter more than which documentation you choose.
Most lenders want your CPA to have a two-year relationship with you. One-year relationships work with some portfolio lenders but limit your options.
Yes, but it restarts underwriting. Better to choose the right path upfront based on which shows stronger income.