Profit & Loss
Profit & Loss Mortgage Loans for Self-Employed Borrowers
A Profit and Loss (P&L) mortgage loan is a specialized financing option designed primarily for self-employed individuals, freelancers, or business owners who may not have traditional forms of income documentation, such as pay stubs or W-2s, but can demonstrate their income through their business's profit and loss statements.
Benefits of a Profit and Loss Mortgage Loan
Income Flexibility
One of the most significant benefits of a P&L mortgage loan is its flexibility in assessing income. Instead of relying on traditional income documentation, lenders accept profit and loss statements prepared by a CPA or accountant. This flexibility is particularly advantageous for individuals whose income comes from non-traditional sources, such as small business owners, independent contractors, or entrepreneurs. It enables them to demonstrate their ability to repay the loan based on the overall profitability of their business rather than focusing on their personal income.
No Need for Tax Returns
In a P&L mortgage loan, borrowers are not typically required to provide tax returns as proof of income. Many self-employed individuals use deductions and write-offs to reduce their taxable income, which can make it difficult to qualify for traditional loans. However, with a P&L mortgage loan, the emphasis is placed on the business’s profitability rather than the taxable income. This reduces the need to worry about underreporting income for tax reasons and still having access to home financing options.
Permitted for self-employed borrowers with a minimum of 25% ownership in the business. The Profit & Loss Statement (P&L) must be prepared by an individual with sufficient knowledge of the business to review or prepare a P&L Statement.
Examples are 3rd party Certified Public Accountant (CPA), an IRS Enrolled Agent (EA), a CTEC registered tax preparer, or a Tax Attorney. PTIN is not allowed.
Required documentation:
Borrowers must be self-employed for at least two (2) years.
12 - 24 month CPA, EA, CTEC, or Tax Attorney prepared P&L Statement representing total business sales and expenses for the period covered by the P&L Statement.
Preparer to provide a signed document with all of the following
Confirmation business has been in existence for a minimum of two (2) years
Indicate the borrower’s ownership percentage of the business
Confirmation letter the preparer completed or filed the most recent business tax return
Key Features:
Min 700 FICO - Up to 80% LTV
No tradeline requirement w/ 3 credit scores
No bank statements
12 or 24 months accepted
Unlimited Cash in Hand
Cash-out used for reserves
Loan amounts up to $3,000,000
CPA, EA, CTEC, or PTIN
