Profit and Loss Statements Loans
Profit and loss statement, often referred to as a P&L statement is a financial document that summarizes the revenues, costs, and expenses incurred by a self-employed applicant or his or her business during a specific period.
Our P&L Statements-based loan products accept 1-year or 2-year profit and loss statements as part of the application process.
Using profit and loss statements for Mortgage Loan qualification has several advantages. Firstly, it allows borrowers with unconventional income sources to demonstrate their financial stability effectively. Secondly, it provides lenders with a transparent and detailed view of the borrower’s financial situation, facilitating a more informed lending decision. For most loan guidelines P&L Statements are required to be prepared by licensed CPAs or Enrolled Tax Preparers, however for a lower LTV loans we offer self-prepared P&L options as well.
Profit and Loss Statement Loans: Explainer
For borrowers seeking non-conventional mortgage loans, one option to consider is a Profit and Loss Statement Loan. In this explainer, we’ll take a closer look at what these loans are, who they’re best suited for, and how they work.
What are Profit and Loss Statement Loans?
Profit and Loss Statement Loans, also known as P&L loans, are a type of non-conforming mortgage loan that a borrower can obtain by using their company’s profit and loss statement for income verification. These loans are designed for self-employed individuals or small business owners who may have difficulty verifying their income using traditional methods.
Who are P&L Loans best suited for?
Self-employed individuals and small business owners who may not have a consistent income stream or who may not have access to traditional income verification methods are best suited for P&L Loans. This includes individuals who work in the gig economy, freelancers, and those who generate income through rental properties or investments.
How do P&L Loans work?
P&L Loans work like traditional loans in that the borrower must provide a down payment and agree to a repayment schedule. However, unlike traditional loans, the borrower’s income is not verified through traditional income documentation such as W2s or pay stubs. Instead, the lender uses the borrower’s profit and loss statement to verify their income.
A borrower’s profit and loss statement show their total income and expenses for the year. This is used by the lender to determine the borrower’s ability to repay the loan. The lender will typically ask for two years of a borrower’s profit and loss statements before approving a loan.
What are the benefits of P&L Loans?
P&L Loans offer a number of benefits over traditional loans, including:
Flexibility: P&L Loans are designed to be flexible and cater to the unique needs of self-employed individuals or small business owners.
Easy access: P&L Loans provide easier access to financing for those who have difficulty obtaining traditional mortgages.
Competitive rates: P&L Loans often offer competitive interest rates compared to other non-conforming loans.
Franklin Mortgage Holdings specializes in providing customized non-conforming mortgage loans to borrowers who may not meet traditional bank criteria. Our team is well-versed in Profit and Loss Statement Loans and can help you determine if this type of loan is the right fit for your needs. Contact us today to learn more and get started on your non-conforming loan journey.