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in South San Francisco, CA
Self-employed borrowers in South San Francisco face a common challenge: proving income without traditional W-2s. Bank statement loans and profit & loss statement loans offer two different paths to mortgage approval for entrepreneurs, freelancers, and business owners.
Both are non-QM mortgages designed specifically for self-employed applicants who can't document income the conventional way. The key difference lies in how each loan type verifies your earning power and what documentation your lender requires.
Understanding which option aligns with your business structure and record-keeping habits can streamline your South San Francisco home purchase and potentially improve your loan terms.
Bank statement loans analyze deposits in your business or personal bank accounts over 12 to 24 months. Lenders review your statements to calculate average monthly income, typically using 50% to 75% of deposits as qualifying income depending on your business type.
This option works well if you maintain consistent banking records but don't have formal CPA-prepared financial statements. Your bank statements serve as the primary income documentation, eliminating the need for tax returns in most cases.
Approval typically requires a 10% to 20% down payment, credit scores above 620, and clear separation between business revenue and personal expenses in your statements. Rates vary by borrower profile and market conditions.
Profit & loss statement loans require CPA-prepared financial documents that detail your business income and expenses. Your accountant creates a P&L statement showing your net business profit, which lenders use to determine your qualifying income.
This approach suits borrowers who already work with a CPA for business purposes and maintain detailed financial records. The formalized documentation can sometimes support higher loan amounts because it shows a complete financial picture.
Lenders typically require 12 to 24 months of P&L statements prepared by a licensed CPA, along with a CPA letter verifying self-employment. Down payment requirements generally range from 10% to 25%, with specific terms depending on your overall financial profile.
The documentation difference is fundamental: bank statement loans rely on raw deposit data, while P&L loans use professionally prepared financial statements. Bank statements show what actually flows through your accounts, whereas P&L statements show net profit after business expenses are deducted.
Cost considerations differ significantly. Bank statement loans eliminate CPA preparation fees, saving hundreds to thousands of dollars. P&L loans require ongoing CPA services, adding to your closing costs but potentially offering more precise income calculation for complex businesses.
Processing timelines also vary. Bank statement loans can move faster since you likely have statements readily available. P&L loans may take longer if your CPA needs time to prepare current financial statements, especially during tax season.
Choose bank statement loans if you maintain clear banking records but don't currently work with a CPA. This option makes sense for freelancers, gig workers, and small business owners who handle their own bookkeeping and want to minimize documentation costs.
Select P&L statement loans if you already have a CPA relationship for your South San Francisco business and maintain detailed financial records. This works best for established businesses with significant deductible expenses that reduce taxable income but shouldn't reduce mortgage qualifying power.
Consider your business complexity too. Simple service businesses often do well with bank statements, while businesses with inventory, multiple revenue streams, or significant capital expenses may benefit from the detailed expense tracking in P&L statements.
Some lenders allow hybrid approaches, but you typically choose one primary documentation method. Your loan officer can determine which single approach or combination yields the best qualifying income for your situation.
Both are non-QM products and typically carry rates 0.5% to 2% higher than conventional loans. Rates vary by borrower profile and market conditions, with your credit score and down payment significantly affecting your final rate.
Most lenders require 12 to 24 months of documentation. Longer history often strengthens your application by showing consistent income patterns over time.
Lenders average your deposits over the review period for bank statement loans. P&L statements may handle income variability better by showing annual net profit, smoothing out monthly fluctuations.
You can use personal bank statements if that's where your business income deposits. However, clearer separation between business and personal finances often results in higher qualifying income calculations.