The DL on P&L Loans

Defy Mortgage
Jun 21, 2023 • 2 min read
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Profit Loss Statement-Based Loan Qualification

Introduction

US business owners and self-employed individuals enjoy a distinct advantage under the US tax code. It permits them to offset portions of their taxable income through deductions – reducing their overall tax liability.

However, they face challenges when applying for mortgages due to income documentation requirements that may not accurately reflect their earnings.

PL loans, also known as Profit and Loss Statement loans, present a highly advantageous Non-QM (Non-Qualified Mortgage) alternative designed for self-employed individuals and business owners. These loans leverage company earnings and expenses to determine loan eligibility, thereby simplifying the process of obtaining a home loan.

While we cannot provide tax advice, we can provide you with all the information that you need about PL loans. Let’s dive in.

 

Benefits of PL Loans

Fewer loan requirements: Similar to bank statement loans, PL loans obviate the need to rely on tax returns, and owing to their classification as Non-QM loans, they entail fewer loan requirements.

A PL loan solely necessitates the submission of a profit and loss statement prepared and signed by a Certified Public Accountant. Unlike a traditional mortgage, with a PL, there is no need for income documentation such as tax returns, W2s, 1099 forms or even bank statement deposits reflecting the past 12 months.

Simple & streamlined: The lender, much like us at Defy Mortgage, will rely on a certified one-year profit and loss statement to establish the borrower’s qualified income for loan eligibility. Because of this, the process is both fast and easy.

Assessing profitability: Self-employed individuals and business owners can leverage PL statements to assess the profitability of their business, enabling them to identify opportunities for enhancing it through strategic adjustments to revenue generation and expense management.

On our own terms: PL loans allow you flexibility in determining what loan structure is right for you. At Defy, we offer 30-year fixed-rate, adjustable and interest-only rate options. More on our products here.

 

Who Are PL Loans For?

PL loans are ideal for self-employed individuals, business owners and others whose income might not be reflected on their tax returns – oftentimes due to write-offs and business deductions.

They offer considerable flexibility in contrast to conventional/traditional loans – catering to the distinctive needs of self-employed borrowers and business owners who are looking to purchase or refinance.

 

The PL Calculation Process

The profit and loss statement gives a comprehensive view of a business's net income, considering revenue and expenses in a certified year-to-date statement.

Unlike bank statements and tax returns, it accurately reflects the income of self-employed individuals and business owners by accounting for deductible business expenses – providing an accurate representation of their actual income and reduced tax liability.

 

PL Loans with Defy Mortgage

  • CPA prepared and signed PL
  • 30-year fixed, adjustable, interest-only options
  • Could require as little as only 10% down on a purchase loan
  • Up to 90% LTV
  • Down to a 600 FICO (reduced LTV)
  • Loans up to $6M
  • Borrowers must be self-employed for at least two (2)
  • Business must be in existence for at least two (2) years

 

Is a PL Loan Right for You?

If you are self-employed, a business owner, have non-traditional income, or have difficulty documenting your income through traditional means, a PL loan is worth looking into.

At Defy Mortgage, we have an expert team of mortgage specialists ready to help business owners of all scales. If you are seeking a flexible, accessible, and straightforward home loan for purchasing or refinancing, we can assist you.

Get a fast mortgage rate quote now and schedule a complimentary 1-on-1 consultation with us. We look forward to hearing from you!

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