Qualify for Your Dream California Home With Profits, Not Pay Stubs Using P&L Loans
If you’re a business owner who’s always dreamed of owning your own home – California P&L loans can help you turn that dream into a reality. If you’re an entrepreneur or have an unconventional income source, qualifying for a traditional mortgage can often be tough. P&L loans are mortgages for business owners in California and can be a lifeline toward a path to homeownership.
This guide will cover everything you need to know about getting a California P&L loan, so you can navigate the application process with confidence. Turn your business success into the foundation of your California dream home – let’s get started!
What Are P&L Loans?
P&L loans are short for profit & loss statement loans. These loans open up the door to homeownership and refinance for Californians with unique income streams by focusing on your business’ finances rather than your personal finances. Lenders review your business’ profit & loss statements to determine how much home you can afford based on the performance of the business – calculating your average earnings over a designated timeframe.
Since P&L loans don’t need traditional income documents, they’re considered to be non-QM loans (non-qualified mortgages). This simply means that they aren’t required to follow the strict lending rules set by the Consumer Financial Protection Bureau (CFPB). Unlike bank statements or tax returns, a profit and loss statement offers a more accurate picture of a business owner’s or self-employed individual’s true earnings. This approach offers a tailored financing solution for business owners, using their company’s financial performance as a key criterion for loan approval.
Who Would Benefit From a California P&L Loan?
P&L loans can be a valuable loan option for those who are small business owners, entrepreneurs, or self-employed as long as their business has produced P&L statements that can be reviewed. Note (and more on this below): Borrowers must be self-employed for at least two (2) OR Business must be in existence for at least two (2) years.
California P&L Loan Requirements
When it comes to P&L loans, each lender can set their own requirements. Although we can’t speak for other lenders, here is what we require for our California P&L loans at Defy:
- 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 depending on your credit score, the lender, and the current market rate. While you can expect P&L loan interest rates to be slightly higher, this is a premium that is often worth paying to get the opportunity to achieve your homeownership dream as someone with non-traditional income.
Where Can You Get a California P&L Loan?
There are a few places where you can get a California P&L loan including private mortgage lenders, banks, and credit unions. Since P&L loans are specialty loans, private mortgage lenders are a good resource as they tend to be more experienced with alternative lending solutions.
Pros and Cons of California P&L Loans
Pros:
- Qualify for a home loan with your business’ P&L statements
- No tax returns or other traditional income documents required
- Faster approval process
- Opens the door to homeownership to a more diverse range of people
Cons:
- Limited availability
- Slightly higher interest rates
- Potentially higher down payment required
California P&L Loan Alternatives
If you’re looking for mortgages in California for self-employed individuals or business-owners, P&L loans aren’t the only option out there. Here are some other loan options to consider if you have a non-traditional income source:
- Bank Statement Loans: Similar to P&L loans, but instead of P&L statements, you can use your bank statements to qualify.
- Debt-Service Coverage Ratio (DSCR) Loans: If you’re looking to purchase an income-generating property, DSCR loans let you qualify with rental income.
- Asset Depletion Loans: If you have access to liquid assets, you can use them to qualify.
Still not sure which loan option is right for you? Contact us at Defy for a free consultation and we can help you choose from these options and more!
California P&L Loan FAQs:
- What is a P&L loan?
A California P&L loan, also known as a profit and loss statement loan, is a financing option that uses your business’ financial performance to help you qualify for a home loan. Instead of relying on traditional income documents, lenders assess your income through your P&L statements.
- How does a P&L loan work?
P&L loans work by analyzing your business’ profitability over a specific period (typically 2-3 years) using your P&L statements. This helps determine your average income and ability to repay the loan.
Basically, lenders review your business’ profit & loss statements to determine how much home you can afford based on the performance of the business – calculating your average earnings over a designated timeframe.
- Who should consider getting a California P&L loan?
P&L loans are great for entrepreneurs, business owners, and self-employed individuals in California who have difficulty qualifying for a traditional home loan.
- What are the qualification requirements for a California P&L loan?
Each lender sets their own criteria for P&L loan requirements, so they tend to vary throughout the industry. At Defy, this is what we would require for our California 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
- What’s the minimum credit score required for a California P&L loan?
The minimum credit score required for a California P&L loan varies by lender, but at Defy, we require a FICO score of 600 or above with reduced LTV.
- How big of a down payment do I need for a California P&L loan?
The down payment for a California P&L loan typically ranges from 10-30%, depending on the lender, your credit score, and overall business performance.
- Where can I get a P&L loan in California?
You can get a P&L loan from banks, credit unions, or private mortgage lenders. For an alternative loan, like a P&L loan, consider a private mortgage lender who has experience with and specializes in non-traditional mortgage solutions, like Defy.
- Do I need a CPA to get a P&L loan in California?
Your profit and loss statement will need to be prepared and signed by a CPA, so if you don’t already have one, it’s important to identify a CPA to work with prior to choosing the P&L loan route.
- Can I refinance a P&L loan in California?
Yes! P&L loans aren’t just for purchasing – they can also be used for homeowners who are looking to refinance their current mortgage.
