Turn Your Texas Business Profits Into Your Dream Home With P&L Loans
As a business owner in the Lone Star State, it can often be difficult to qualify for a home loan without having traditional income documents. However, this is just a hurdle rather than a roadblock when it comes to your homeownership journey. Texas P&L loans are designed to be mortgages for business owners in Texas and can help you get to that finish line.
In this guide, we’ll be exploring the topic of Texas P&L loans to help you take that first step in your journey. Saddle up and get ready to ride that homeownership (or refinance) wave!
What Are P&L Loans?
Also known as profit & loss statement loans, P&L loans are a type of alternative mortgage financing that allows borrowers to use their business’ P&L statements to prove their income. In contrast, conventional loans require borrowers to provide traditional income documents, like pay stubs, W2s, and tax returns. These documents typically don’t reflect a business owner or entrepreneur’s true income.
Lenders analyze the business’ P&L statements over a specific period (typically 2-3 years) to determine how much home the borrower can afford. By analyzing your business’s profit & loss statements, lenders can assess your average income over a specific period to determine your ability to repay the loan.
P&L loans use an alternative income verification method, making them a non-QM loan (non-qualified mortgage). This means they don’t have to follow the strict lending standards set by the Consumer Financial Protection Bureau (CFPB) when evaluating a borrower’s ability to repay.
Who Should Consider Getting a Texas P&L Loan?
Anyone who has a business that produces P&L statements should consider getting a Texas P&L loan, including business owners, entrepreneurs, and self-employed individuals.
Texas P&L Loan Qualification Requirements
Since P&L loans are non-QM, it’s up to each lender to set their own qualification requirements. While we can’t provide other lenders’ requirements, here is what we require at Defy for our P&L loans:
- CPA prepared and signed P&L
- Borrowers must be self-employed for at least two (2)
- Business must be in existence for at least two (2) years
- Minimum FICO score of 600 (with reduced LTV)
- Maximum loan-to-value (LTV) of 90%
- Maximum loan amount of $6M
- No tax returns, 1099s or bank statements
- 30-year fixed, adjustable, interest-only options
P&L Loan Interest Rates
Interest rates for P&L loans can vary based on a few different factors, such as the lender, your credit score, and the prevailing market rates. Since P&L loans are alternative mortgages, the interest rates tend to be slightly higher than conventional loans. While not ideal, the opportunity to become a homeowner is often worth the higher rate for many people.
Where Can You Get a Texas P&L Loan?
Texas P&L loans are available at banks, credit unions, and private mortgage lenders. While banks and credit unions may seem like obvious choices, consider private mortgage lenders because of their experience with specialty loans. A private mortgage lender, like Defy, can help make the process quicker and smoother, helping you navigate the closing process with confidence.
Pros and Cons of Texas P&L Loans
Pros:
- Allows a more diverse range of people to become homeowners
- Qualify for a mortgage using your business’ P&L statements
- No tax returns, W2s, or pay stubs required
- Faster approval process
Cons:
- Limited availability
- Can have slightly higher interest rates
- Potentially higher down payment required
Texas P&L Loan Alternatives
If you’re looking for mortgages in Texas for self-employed, there are plenty of non-QM loan options beyond just P&L loans. For those with non-traditional income sources, here are some other loan options to consider:
- Bank Statement Loans: Use your bank statements to qualify. Another great option for self-employed individuals who don’t have access to P&L statements.
- Asset Depletion Loans: Use your liquid assets to qualify. A great option for those who have built up a significant nest egg in bank accounts, investment accounts, and retirement accounts.
- Debt-Service Coverage Ratio (DSCR) Loans: Use rental income to qualify. A great option for real estate investors who have income-generating properties.
At Defy, we offer all of these loan options and more. If you’re still unsure of which one is the right fit for you, contact us for a personalized consultation. We would love to help!
Texas P&L Loan FAQs:
- What are P&L loans?
P&L loans are short for profit & loss statement loans. These are loans that use your business’ performance to help you qualify for a home loan instead of relying on traditional documents, like W2s, tax returns, and pay stubs.
- How do P&L loans work?
P&L lenders analyze your P&L statements over the course of a specified period to determine your business’ profitability. Then, they calculate your average income and how much home you can afford. For context, A profit and loss statement provides a comprehensive view of a company’s financial health by detailing revenue and expenses over a certified period.
- Who can get a P&L loan?
If you have a business that produces P&L loans, you could potentially qualify for one. This includes business owners, self-employed individuals, and entrepreneurs.
- What do I need to qualify for a Texas P&L loan?
Qualification requirements vary by lender when it comes to P&L loans. At Defy, these are our requirements:
- CPA prepared and signed P&L
- Borrowers must be self-employed for at least two (2)
- Business must be in existence for at least two (2) years
- Minimum FICO score of 600 (with reduced LTV)
- Maximum loan-to-value (LTV) of 90%
- Maximum loan amount of $6M
- No tax returns, 1099s or bank statements
- 30-year fixed, adjustable, interest-only options
- What minimum credit score do I need to qualify for a Texas P&L loan?
Similar to qualification requirements, minimum credit score requirements vary depending on the lender. At Defy, we require a minimum FICO score of 600 or above with reduced LTV.
- Is a down payment required for a Texas P&L loan?
Yes, a down payment of anywhere between 10-30% is typically required for a Texas P&L loan.
- Where can I get a P&L loan in Texas?
You can get a Texas P&L loan from banks, credit unions, or private mortgage lenders. Keep in mind that private mortgage lenders, like Defy, tend to have more experience with alternative lending products, typically leading to a faster closing process.
- Are P&L loans in Texas considered non-QM?
Yes, P&L loans in general and in Texas are considered non-QM loans (non-qualified mortgages) since they don’t follow the strict lending rules set by the Consumer Financial Protection Bureau (CFPB).
