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in Novato, CA
Self-employed borrowers in Novato face a choice: prove income with bank statements or a CPA-prepared P&L. Both are non-QM loans designed for business owners who can't show traditional W-2s.
The right option depends on how you run your books and what documentation you already have. One path requires minimal paperwork, the other demands formal accounting. Both can close deals that conventional loans reject.
Bank statement loans use 12 to 24 months of personal or business bank deposits to calculate income. Lenders average your deposits and apply an expense ratio, typically 25% to 50% depending on your business type.
This works for contractors, consultants, and small business owners who run transactions through accounts but don't maintain formal books. You skip tax return analysis entirely. Most programs accept 12-month statements, though 24 months can improve your approval odds.
Profit & loss statement loans rely on a CPA-prepared P&L covering 12 to 24 months of business activity. Your accountant signs off on revenue and expenses, giving lenders a clear income picture without full tax returns.
This path suits borrowers who already maintain formal books and work with a CPA year-round. The P&L shows net income directly, so lenders don't need to estimate expenses. You'll likely need a business license and potentially a CPA letter confirming the numbers.
Bank statement loans calculate income for you using deposit averages. P&L loans use the net income your CPA reports. If you write off heavy expenses, bank statements might show higher qualifying income since lenders use flat expense ratios instead of your actual deductions.
Documentation separates these options sharply. Bank statements require PDF downloads and possibly a letter from your bank. P&L loans need a licensed CPA to prepare financials and sign them. The CPA relationship adds cost upfront but can streamline future refinances or purchases.
Choose bank statements if you don't work with a CPA regularly or if your tax returns show low income due to aggressive write-offs. This works for contractors, freelancers, and service businesses with simple books. You'll qualify based on gross deposits, not net income.
Go with P&L if you maintain formal accounting and your CPA already prepares monthly or quarterly financials. This suits established businesses with inventory, payroll, or complex operations. The P&L gives lenders confidence in income stability, which can offset other credit weaknesses.
Most lenders pick one income calculation method per loan. Some allow combining if it strengthens your file, but expect underwriting to use the lower qualifying income of the two.
Yes, both are non-QM loans with similar down payment requirements, typically 10-20% minimum. Your credit score and loan amount affect the exact number more than the income documentation type.
Bank statement loans usually close quicker since you're just gathering existing account records. P&L loans add time for CPA preparation and review, especially if financials aren't current.
Rates stay similar since both are non-QM products for self-employed income. Your credit score, loan-to-value, and property type drive rate more than documentation method.
You can pivot if initial documentation doesn't work, but it restarts underwriting. Most brokers determine the best path upfront based on your business structure and existing records.