How to Turn Your Tennessee Hustle Into Homeownership With P&L Loans
Owning a business often comes with unique challenges and opportunities. When it comes to financing a home, traditional loans might not always be the best fit. Tennessee P&L loans are essentially mortgages for business owners in Tennessee and they can help you qualify based on your business’ performance.
In this guide, we’ll explore how you can make your homeownership dreams a reality using Tennessee P&L loans. Let’s get started!
What Is a P&L Loan?
A P&L loan is also known as a profit & loss statement loan. Rather than using traditional income documents, like W2s, pay stubs, and tax returns, to prove your income, you can use your business’ profit & loss statement to qualify. This alternative income verification method can be beneficial for business owners who have difficulty showing their true income on their tax returns.
P&L loans are categorized as a non-QM loan (non-qualifying mortgage) since they don’t have to follow the strict lending rules set by the Consumer Financial Protection Bureau (CFPB). This allows non-QM loans, including P&L loans, to have much more flexible qualification requirements compared to conventional loans.
Who Should Get a Tennessee P&L Loan?
Anyone with a business that produces P&L statements should consider getting a Tennessee P&L loan, including small business owners, self-employed individuals, and entrepreneurs.
Tennessee P&L Loan Qualification Requirements
Since P&L loans are non-QM loans, each P&L lender can come up with their own qualification requirements. Although we don’t have this information for other lenders, here is what we require for our 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 tend to vary depending on factors like the lender, your credit score, and the current market interest rates. They fluctuate similarly to conventional rates, but are typically slightly higher. While a slightly higher rate isn’t ideal, business owners who haven’t been able to qualify for conventional loans often find it worth it to make their homeownership dreams into a reality.
Where Can You Get a Tennessee P&L Loan?
Tennessee P&L loans are available from banks, credit unions, and private mortgage lenders. For non-QM loans, like P&L loans, private mortgage lenders, like Defy, are usually more experienced and knowledgeable due to the amount of alternative mortgages they process. Because of this experience, private mortgage lenders tend to help you close faster and with confidence.
Pros and Cons of Tennessee P&L Loans
Pros:
- Provides the opportunity for a more diverse range of people to become homeowners
- Qualify for a mortgage using your business’ P&L statements
- No tax returns or other income documents required
- Faster approval process
Cons:
- Limited availability
- Can have slightly higher interest rates
- Potentially higher down payment required
Tennessee P&L Loan Alternatives
If you’re looking for mortgages in Tennessee for self-employed and aren’t sure if P&L loans are right for you, there are several other non-QM loan options you should consider:
- Bank Statement Loans: Use your bank statements to qualify.
- Asset Depletion Loans: Use your liquid assets from bank accounts, investment accounts, and retirement accounts to qualify.
- Debt-Service Coverage Ratio (DSCR) Loans: Use your investment property’s rental income to qualify.
If you’re looking for guidance on which loan type would be the best fit for you, contact us at Defy for a personalized consultation. We offer all of these loan options and more. We can’t wait to hear from you!
Tennessee P&L Loan FAQs:
- What are P&L loans?
P&L loans are short for profit & loss statement loans. They’re a type of mortgage that uses a business’ P&L statements to determine if the business owner can qualify.
- How do P&L loans work?
P&L lenders evaluate your P&L statements over the course of a specified period (typically 2-3 years) to assess its profitability. From there, lenders will determine your average monthly income to see how much home you can afford.
- Who should consider getting a Tennessee P&L loan?
Business owners who have access to P&L statements should consider getting a Tennessee P&L loan. This includes, but isn’t limited to, entrepreneurs, self-employed individuals, and small business owners.
- What are the requirements to qualify for a Tennessee P&L loan?
The qualification requirements for a Tennessee P&L loan vary since each lender can set their own criteria. At Defy, this is what we would require 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
- What credit score do I need to qualify for a Tennessee P&L loan?
Minimum credit score requirements are determined by each individual lender, meaning there’s no set minimum across the industry. At Defy, a minimum FICO score of 600 or above with reduced LTV is required for our P&L loans.
- Is a down payment required for a Tennessee P&L loan?
Yes, a down payment is required for a Tennessee P&L loan. The exact percentage depends on the lender and your qualifications, but you can expect to put down anywhere between 10-30%.
- Where can I get a P&L loan in Tennessee?
P&L loans are available from a wide variety of lenders, including banks, credit unions, and private mortgage lenders. When it comes to getting a P&L loan, private mortgage lenders, like Defy, can be a valuable resource with their knowledge and experience – they can help you navigate the closing process with confidence.
- Can you get a P&L loan in states other than Tennessee?
Yes, you can! These loans are available in many states across the United States. If you’re interested in obtaining a P&L loan in a particular state, be sure to research local and national lenders that operate in your area. For other state-specific P&L loan blogs, check out the following: Texas P&L Loans and California P&L Loans.
