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in Tracy, CA
Self-employed buyers in Tracy face a choice between two non-QM income verification methods. Bank statement loans use 12-24 months of deposits to calculate income, while P&L loans rely on a CPA-prepared profit and loss statement.
Both programs help business owners who can't provide W-2s qualify for mortgages. The right choice depends on how you manage your finances and what documentation you already have on hand.
Bank statement loans analyze 12 or 24 months of business or personal bank statements to calculate your qualifying income. Lenders typically use 50-75% of your average monthly deposits as income, depending on your business type.
This works well for Tracy business owners who deposit most revenue into their accounts but write off significant expenses on tax returns. You skip the need for CPA statements, though you'll need consistent deposit patterns.
Rates typically run 1-2% higher than conventional loans. Most lenders require 10-20% down and credit scores above 620, though some allow lower scores with bigger down payments.
P&L loans require a certified public accountant to prepare a profit and loss statement covering 12-24 months of business activity. Lenders use the bottom-line profit shown on this statement as your qualifying income.
This route fits Tracy entrepreneurs who already work with CPAs for tax planning or business management. You'll need organized books and a CPA willing to certify your financials meet lending standards.
Rates mirror bank statement programs, typically 1-2% above conventional. Down payment requirements range from 10-20%, with credit minimums around 620 depending on the lender.
The core split comes down to documentation style. Bank statement loans let you skip the CPA and submit statements directly from your bank, while P&L loans require professional financial preparation but may show higher qualifying income.
Bank statements work better when you deposit everything but write off major expenses. P&L statements shine when your actual profit exceeds what deposit analysis would show, especially if you have irregular deposit patterns or multiple accounts.
Processing times differ too. Bank statement loans often close faster since you're just gathering statements you already have. P&L loans need CPA involvement, which adds 1-2 weeks if your books aren't current.
Choose bank statement loans if you deposit consistently, don't work with a CPA, and want to close quickly. This works for most Tracy contractors, consultants, and small business owners with straightforward cash flow.
Go with P&L loans if you already have a CPA relationship, maintain detailed books, or your actual profit tells a better story than your deposits. Real estate agents, business owners with complex structures, and those with multiple income streams often benefit here.
Some borrowers qualify for both but get better terms with one option. We run scenarios both ways to see which income calculation gets you the most house or the lowest payment.
Most lenders accept either personal or business accounts. Using personal accounts works fine if that's where your business income gets deposited.
Expect $300-800 depending on your business complexity. If you already use a CPA for taxes, they often charge less for a lending P&L.
Bank statements typically qualify you at 50-75% of deposits. P&L uses actual profit, which may be higher or lower depending on your expense structure.
Most lenders want 12-24 months of statements or P&L history. You don't need two years in the same business, just documented self-employment income.
Yes, but it restarts underwriting and delays closing. Better to choose the right path upfront based on which shows your strongest income picture.