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in Merced, CA
Self-employed borrowers in Merced face a common problem: traditional lenders want tax returns that show every write-off you took. Both bank statement loans and P&L statement loans skip the tax return requirement, but they verify income differently.
Bank statement loans pull income directly from deposits in your business or personal accounts. P&L statement loans use a CPA-prepared financial statement showing your business profit over 12-24 months.
Bank statement loans analyze 12 to 24 months of deposits in your business or personal checking accounts. Lenders calculate your average monthly income from those deposits, usually at 50% to 75% of total deposits to account for business expenses.
This option works well if you have consistent deposit patterns and minimal cash transactions. You'll typically need a 640+ credit score and 10-20% down depending on the lender.
The documentation is straightforward: provide your bank statements and the lender does the math. No need to involve your CPA or create additional financial documents.
Profit & Loss statement loans require a CPA-prepared P&L covering 12-24 months of business activity. The lender uses your net profit as qualifying income, which often shows a higher income figure than bank statements would reveal.
This route makes sense if you run a cash-heavy business, have complex accounting, or want to show maximum income. Your CPA prepares the P&L specifically for mortgage purposes, highlighting profit without all the tax write-offs.
Requirements are similar to bank statement loans: 640+ credit, 10-20% down. The difference is you're paying your CPA to prepare documentation instead of just handing over statements.
The core difference is documentation source. Bank statement loans pull directly from your accounts while P&L loans require a CPA to create a financial statement. This affects both cost and timeline—bank statements are free and immediate, CPAs charge $500-2,000 and need weeks to prepare.
Income calculation differs significantly. Bank statements multiply deposits by 0.50-0.75 as a blanket expense ratio. P&L statements show your actual net profit after real business expenses, which can be higher or lower depending on your business structure.
Merced's agricultural business owners and contractors often prefer bank statement loans for speed and simplicity. Professional service providers like consultants or agents sometimes show better income on a P&L because their business expenses are legitimately lower.
Choose bank statement loans if you have clean, consistent deposits over 12-24 months and want to close faster. This works for most service businesses, contractors, and anyone who deposits most of their income into accounts.
Go with P&L statement loans if you handle a lot of cash, have irregular deposit patterns, or know your actual net profit is significantly higher than what deposit calculations would show. Also choose this if you already work with a CPA who can prepare the statement quickly.
Some Merced borrowers run both calculations before choosing. Your broker can estimate qualifying income both ways to show which path gives you more buying power.
Yes, both loan types accept personal or business accounts. Lenders just need to see where your business income gets deposited.
Rates are similar since both are non-QM loans. Your credit score and down payment affect rates more than the documentation type.
Most lenders require at least 12-24 months of business history. Newer businesses may not qualify for either program yet.
Yes, but it will reset your timeline. Choose your documentation path before starting the application to avoid delays.
Bank statements often work well if you have seasonal but documented deposits. P&L loans can smooth out seasonal income variations better.