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in Torrance, CA
Self-employed borrowers in Torrance face a documentation choice that affects approval odds and rate pricing. Bank statement loans pull income directly from deposits. P&L statement loans rely on a CPA's calculation of business profit.
Most self-employed borrowers default to whatever their accountant recommends. That's backward. Your tax strategy should inform which income doc you use, not the other way around.
Bank statement loans calculate income from 12 or 24 months of business or personal bank statements. Underwriters apply an expense ratio—typically 25% to 50%—then use the remainder as qualifying income. A contractor depositing $20,000 monthly with a 50% expense ratio qualifies on $10,000 per month.
This works for borrowers who show strong deposits but write off everything come tax time. You don't need a CPA letter. You just need consistent deposit history and reasonable explanations for large one-time transfers.
P&L statement loans use a CPA-prepared profit and loss statement to establish income. The CPA calculates your business profit, adds back non-cash expenses like depreciation, and certifies the number. That figure becomes your qualifying income.
This route favors service businesses with low overhead and clean books. A consultant or attorney with 70% profit margins will qualify on higher income through a P&L than through bank statements with a 50% expense haircut.
Bank statements show what came in. P&L statements show what you kept. If your business has high operating costs but strong revenue, bank statements likely qualify you higher. If you run lean with strong margins, the P&L route wins.
Pricing differs by about 0.25% to 0.50% between the two programs across most lenders. Bank statement loans typically price slightly higher due to the estimation involved in expense ratios. P&L loans price better when your CPA's numbers align with industry norms for your business type.
Choose bank statements if you write off aggressively, lack a CPA relationship, or need to close in under 30 days. Choose P&L if your tax returns show solid profit, you work with a licensed CPA, and your business operates with predictable margins.
Run both scenarios before committing. I see Torrance business owners who assume P&L is cleaner, then discover their expense add-backs don't move the needle. Test your deposits against your certified profit. Rates vary by borrower profile and market conditions.
No. Lenders require one income documentation method per file. You choose the route that qualifies you highest before submitting.
Yes. Most non-QM lenders require 620 minimum for both programs, with better pricing at 680 and above.
Most CPAs can turn a mortgage P&L in 5 to 10 business days if your books are current. Budget two weeks to be safe.
Yes, but it resets underwriting timelines. Switching documentation adds 7 to 14 days to your approval process.
Bank statements simplify things when you run income through several LLCs. P&L loans require separate statements per entity, then consolidation.