Loading
in Cotati, CA
Both bank statement and P&L loans solve the same problem: proving income when your tax returns don't show what you actually make. The difference is how much documentation you want to provide and whether your accountant already prepared your financials.
Most Cotati self-employed borrowers qualify faster with bank statements. P&L loans require CPA involvement upfront, which adds time and cost but can work better if you already maintain formal books for your business.
Bank statement loans use 12 or 24 months of personal or business bank deposits to calculate income. Lenders average your deposits and apply an expense factor, usually 25% to 50%, to arrive at qualifying income.
You skip the tax return requirement entirely. This works well if you write off most of your income or run cash through your accounts consistently. Rates run 1% to 2% higher than conventional loans, and most lenders want 10% to 20% down.
P&L loans require a CPA-prepared profit and loss statement covering 12 to 24 months. Your accountant must be licensed, and some lenders call them to verify the numbers. This creates a cleaner income picture if your books are already organized.
The advantage is transparency. Lenders see exactly how your business performs, which can justify higher loan amounts if your P&L shows strong net income. You still avoid full tax return scrutiny, but expect similar pricing to bank statement loans.
The biggest split is documentation burden. Bank statement loans need only your statements, which you already have. P&L loans require paying a CPA to prepare financials if you don't have them, adding weeks and several hundred dollars to the process.
Income calculation differs too. Bank statements use raw deposits minus a standard expense factor. P&L statements show actual net income after expenses, which can work for or against you depending on how you run your books.
Choose bank statement loans if you want speed and already have consistent deposits. This route works for most Cotati self-employed borrowers who aren't maintaining formal books or don't want to involve their accountant in the mortgage process.
Pick P&L loans if your CPA already prepares monthly or quarterly financials and your net income looks strong on paper. This makes sense for established businesses with clean books who can show profitability without needing the deposit-averaging method.
No, lenders choose one income verification method. You can't mix documentation types on a single application, though you can apply with different methods to compare.
No CPA needed for bank statement loans. You provide the statements directly, and the lender calculates income using their own formulas.
Rates are nearly identical between the two. Both are non-QM products priced 1-2% above conventional loans based on credit and down payment.
Bank statement loans typically close in 21-30 days. P&L loans add 1-2 weeks if your CPA needs to prepare statements from scratch.
Switching restarts underwriting and delays closing. Choose your documentation method before applying to avoid backtracking and extra costs.