Twelve months, signed
The statement usually covers the last twelve months and is signed by the preparer; some programs accept or ask for two years.
Profit and loss loans
Profit and loss (P&L) only mortgage loans for business owners.
A P&L only mortgage lets a self-employed borrower use a profit and loss statement for the business, prepared by an independent tax professional, in place of tax returns. Here is how it works, who it suits, and what you need.
Prefer to talk? Call 732-686-9999
- Direct, licensed mortgage lender
- NMLS #103098
- Equal Housing Lender
What would you like to do?
Pick the one closest to you. A few short questions follow, and a licensed loan officer gets back to you.
Get a quoteReady for the full application? Apply online
Fidelity Residential · NMLS #103098 · Equal Housing Lender
- Direct, licensed lenderNMLS #103098. Check our licences on NMLS Consumer Access.
- A licensed loan officerA real person reviews your file and answers your questions.
- Several self-employed programsWe compare programs to find the rules that fit your business.
- Apply online or by phoneStart a quote, apply online or call 732-686-9999.
The basics
What a profit and loss loan is
A profit and loss loan lets a self-employed borrower show income with a profit and loss statement for the business, prepared by an independent tax professional, instead of tax returns. The statement usually covers the last twelve months and is signed by the preparer; some programs accept or ask for two years.
The preparer is normally a CPA, an IRS enrolled agent or a state-registered tax preparer, and must be independent of the business; a statement you prepare yourself is not accepted. The business’s net profit for the period, adjusted for your share of ownership and for non-cash items such as depreciation, is the income.
These loans are not sold to Fannie Mae or Freddie Mac, so each program sets its own rules. Your credit, your savings, the appraisal and your debts compared with your income are still checked, and for a home you live in the lender must make a good-faith decision that you can repay the loan.
Who it suits
- Business owners whose tax returns show less than the business brings in
- Owners with a tax professional who prepares the business’s books and can sign a statement
- Businesses whose deposits do not tell the story: several accounts, large one-off receipts, or costs paid before the money reaches the bank
- An established business: most programs want at least two years in the business and a meaningful ownership share
Profit and loss income is for the self-employed. If your deposits tell the story better, see bank statement loans; if you are paid on 1099 forms, see 1099 loans.
Profit and loss loans at a glance
- What it is: a mortgage for a self-employed borrower that uses a profit and loss statement for the business prepared and signed by an independent tax professional, instead of tax returns.
- Who it is for: business owners with at least two years in the business and a meaningful ownership share, whose tax returns show less than the business earns.
- What you need: the statement, usually for the last twelve months, signed by a CPA, an IRS enrolled agent or a state-registered tax preparer; in most programs the latest two or three months of business bank statements; proof of your ownership and time in business; statements for the down payment and closing costs; photo identification.
- How the income is counted: the net profit for the period, adjusted for your share of ownership and for non-cash items such as depreciation, averaged by month.
- Not: a stated-income loan. Income, credit, assets and the home are all verified. The bank statement income calculator has a stand-alone profit and loss method that shows how the figures you enter would be read; it is an estimate, not what you will be offered.
The income
How profit and loss income is worked out
The statement does the work that tax returns do on an ordinary mortgage, and the lender checks that it holds up.
An independent tax professional
The preparer is normally a CPA, an IRS enrolled agent or a state-registered tax preparer, and must be independent of the business. A statement the borrower prepares is not accepted.
Net profit, adjusted
The income is the business’s net profit for the period, adjusted for your share of ownership and for non-cash items such as depreciation, then averaged by month. Your debts compared with that income are checked as on any mortgage.
Recent business bank statements
In most programs the lender also asks for the latest two or three months of business bank statements to confirm the revenue the statement shows. A few programs can waive them when the preparer confirms they filed your tax returns.
A co-borrower’s wages
A co-borrower’s wage income can be added to the profit and loss income, documented the usual way with pay stubs and W-2 forms.
See it with your own figures
Our bank statement income calculator has a stand-alone profit and loss method: enter the net profit, the non-cash items and your share, and it shows the arithmetic step by step. An estimate from your figures, not an offer or a loan decision.
Open the calculator
Requirements
Profit and loss (P&L) loan requirements: what you need
The statement is not the only document. Most borrowers can start with these.
- The profit and loss statement, usually for the last twelve months, signed by the preparer
- An independent preparer: a CPA, an IRS enrolled agent or a state-registered tax preparer who is not part of the business
- Recent business bank statements, the latest two or three months, in most programs
- Proof of your ownership share and time in business: a tax professional’s letter, an operating agreement, a licence or a state filing; most programs want at least two years in the business and a meaningful share
- Statements for the down payment, closing costs and savings after closing
- Photo identification for each borrower
Still checked, as on any mortgage. Your credit, your savings, the appraisal and your debts compared with your income, and for a home you live in the lender’s good-faith decision that you can repay the loan. Primary homes, second homes and rental properties are all possible, with the largest financing on a primary home. Do not send tax returns unless your loan officer asks: they are not part of this program.
How it works
The steps to a profit and loss loan
Talk about your business
How long you have owned it, what share you hold, who prepares its books, and the home you want to buy or refinance.
Your preparer signs the statement
A profit and loss statement for the period, usually the last twelve months, signed by the preparer.
The income is worked out
Net profit, adjusted for your ownership share and for non-cash items, averaged by month, and checked against your recent business bank statements.
Underwriting and closing
Credit, savings and the appraisal are reviewed as on any mortgage. You review your closing disclosure and sign.
Questions
Common questions about profit and loss loans
Who can prepare the profit and loss statement?
Normally a CPA, an IRS enrolled agent or a state-registered tax preparer, who must be independent of the business. A statement you prepare yourself is not accepted.
Do I need to send tax returns?
No. The statement takes the place of tax returns for your income. Do not send them unless your loan officer asks.
Do I still need bank statements?
Usually a few. In most programs the lender asks for the latest two or three months of business bank statements to confirm the revenue the statement shows. A few programs can waive them when the preparer confirms they filed your tax returns. That is far fewer than a bank statement loan, which uses one or two years of statements.
How is the income worked out?
The business’s net profit for the period, adjusted for your share of ownership and for non-cash items such as depreciation, averaged by month. The calculator’s profit and loss method shows the arithmetic with your own figures.
How long do I need to have owned the business?
Most programs want at least two years in the business and a meaningful ownership share. Proof is a tax professional’s letter, an operating agreement, a licence or a state filing.
Does the statement have to cover a full year?
Usually the last twelve months. Some programs accept or ask for two years.
Can a co-borrower with a regular paycheck apply with me?
Yes. A co-borrower’s wage income can be added, documented the usual way.
Can I buy a second home or a rental property?
Yes. Primary homes, second homes and rental properties are all possible; the largest financing is on a primary home. A loan officer can tell you which programs fit the home you have in mind.
Is my income still verified?
Yes. The lender reviews the signed statement, confirms the preparer is independent of the business, confirms the revenue against your recent business bank statements in most programs, and checks your credit, savings and the home’s value. For a home you live in, the lender must make a good-faith decision that you can repay the loan.
Do you lend in my state?
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999.
Ready to talk about a profit and loss loan?
Get a quote, apply online, or talk it through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.
Last reviewed: