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in Escalon, CA
Escalon's self-employed borrowers have two main non-QM paths when tax returns don't show enough income. Bank statement loans use deposits to calculate income, while P&L loans rely on a CPA's profit and loss statement.
Both skip traditional W-2 documentation. The right choice depends on how you run your business finances and what records you already keep.
Bank statement loans analyze 12 to 24 months of business or personal bank deposits. Lenders calculate income by averaging monthly deposits, then apply an expense ratio (typically 25-50% depending on industry).
You don't need a CPA or formal bookkeeping. If money flows through your bank accounts regularly, you have what lenders need to approve your file.
P&L statement loans require a CPA-prepared profit and loss statement covering 12-24 months. The CPA must be licensed and unrelated to you, and they'll sign a certification letter.
This option works well if you already have a CPA doing your books. The P&L shows net income directly, so lenders don't apply arbitrary expense ratios to your revenue.
The main split is preparation cost and income calculation. Bank statement loans cost nothing extra to prepare—you already have the statements. P&L loans require paying a CPA, but they often show higher qualifying income because actual expenses replace lender-assumed ratios.
Bank statement loans move faster since you're not waiting on a CPA. P&L loans can qualify you for more house if your business has low overhead and high profit margins.
Choose bank statement loans if you don't have a CPA relationship or need to close quickly. This works for contractors, consultants, and service providers with straightforward deposit patterns.
Go with P&L loans if you already work with a CPA and your business shows strong net profit. This path makes sense for Escalon's agricultural business owners, equipment operators, and established small businesses with detailed books.
Yes, if you get a P&L prepared before closing. Most borrowers pick one path upfront since it affects your qualification timeline and which documents you gather.
P&L loans typically show higher income if your business has low expenses. Bank statement loans apply standard expense ratios that may understate your actual profit.
Yes, both are non-QM loans with similar credit and down payment requirements. The documentation difference doesn't affect minimum qualification standards.
Bank statement loans average deposits over 12-24 months, smoothing out seasonal swings. P&L loans may work better if your expenses also fluctuate with revenue.
No, lenders pick one income documentation method per loan. Choose the approach that shows your income most accurately for qualification purposes.