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in Colma, CA
Self-employed borrowers in Colma have two primary documentation options when traditional W-2 income verification isn't possible. Bank statement loans and profit & loss statement loans both serve business owners, freelancers, and independent contractors who need flexible income verification.
Both loan types fall under non-QM mortgages, designed specifically for borrowers with non-traditional income sources. The main difference lies in how your income gets documented and which method works best for your business structure and financial records.
Bank statement loans use 12 to 24 months of personal or business bank deposits to calculate your qualifying income. Lenders analyze your deposits to determine cash flow patterns, typically using 50-75% of average monthly deposits as your qualifying income.
This option works well for borrowers who deposit most of their earnings into bank accounts. You don't need CPA-prepared financial statements or complex business documentation. The bank statements themselves provide the income evidence needed for approval.
Many Colma business owners prefer this route because it's straightforward. If you have consistent deposits showing stable income, this documentation path often proves simpler than preparing detailed financial statements.
Profit & loss statement loans require a CPA-prepared P&L statement to document your business income and expenses. This financial statement must be prepared by a licensed certified public accountant, not just any tax preparer or bookkeeper.
The P&L shows your net business income after expenses, which becomes your qualifying income for the mortgage. This method often results in higher qualifying income for borrowers who have significant business expenses that reduce their taxable income.
San Mateo County business owners who already work with CPAs for tax planning may find this option convenient. You're essentially using professional financial documentation that already exists for your business operations.
The documentation requirement is the primary distinction. Bank statement loans need only your bank statements, while P&L loans require professionally prepared financial statements from a licensed CPA. This affects both preparation time and upfront costs.
Income calculation differs significantly between the two. Bank statement loans use a percentage of gross deposits, while P&L loans use net income after expenses. For borrowers with high business expenses, P&L loans may show higher qualifying income despite lower take-home deposits.
Processing timelines vary as well. Bank statements are typically ready to submit immediately, while getting a CPA-prepared P&L may take additional time if you don't already have current statements. Rates vary by borrower profile and market conditions for both programs.
Choose bank statement loans if you have consistent deposits, minimal business expenses, and want simpler documentation. This works best for contractors, consultants, and service providers who deposit most earnings directly into accounts without complex expense structures.
Consider P&L loans if you have a CPA relationship, significant legitimate business expenses, or a business structure with complex income streams. Real estate investors, business owners with equipment costs, and professionals with high overhead often benefit from this approach.
Your specific situation in Colma matters most. Review your last year of bank deposits and compare them to your net business income. The option that shows higher qualifying income while meeting documentation requirements typically makes the most sense for your purchase or refinance.
No, lenders require you to choose one documentation method. You'll use either 12-24 months of bank statements or CPA-prepared P&L statements, not both together for income verification.
Most lenders require at least two years of self-employment history for both loan types. This demonstrates stable income patterns and reduces lender risk for non-QM financing.
Rates vary by borrower profile and market conditions rather than documentation type. Your credit score, down payment, and overall financial strength impact rates more than whether you use bank statements or P&L.
Yes, if bank statement calculations don't provide enough qualifying income, you can request P&L documentation instead. This flexibility helps self-employed borrowers find the best path to approval.
Both bank statement and P&L loans can finance investment properties. The documentation method remains the same, though investment property requirements may include higher down payments and reserves.