I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I model bank statement and P&L scenarios side by side for every self-employed client — the difference in qualifying income can be significant. Call (800) 239-1103.
If you are self-employed and qualifying for a mortgage without tax returns, you will almost certainly be choosing between two primary documentation strategies: bank statement loans and P&L only loans. Both programs bypass your tax returns, but they work differently and favor different types of borrowers.
How Bank Statement Loans Work
A bank statement loan uses 12 or 24 months of your business or personal bank deposits as income documentation. The lender averages your monthly deposits, applies an expense factor (typically 50% for business accounts), and qualifies you on the resulting net figure. If your CPA provides a letter documenting that your actual business expense ratio is lower than 50%, many lenders will use that ratio instead — resulting in higher qualifying income.
Best for: Business owners whose income flows primarily through their business checking account, who may not have a CPA maintaining formal books but who have strong, consistent deposit history.
Pros: No CPA required, widely available, works for many types of businesses, expense factor can be adjusted with CPA letter, 10% down available.
Cons: Standard 50% expense factor on business accounts reduces qualifying income; you must provide all statements with no gaps; seasonal businesses can average poorly across 12-month windows.
How P&L Only Loans Work
A P&L only loan uses a Profit and Loss statement prepared and signed by a CPA or licensed tax professional as the sole income documentation. The net income figure on the P&L is used directly as qualifying income, with no bank statement averaging required. The CPA prepares a 12 or 24-month P&L and certifies its accuracy — that document alone is what the lender uses.
Best for: Business owners who work with a CPA, maintain clean books, and whose P&L shows strong net income relative to what bank deposit averaging would yield after expense factors are applied.
Pros: Cleaner documentation, bypasses deposit volatility and gaps, may show higher qualifying income than bank statement averaging, no need to gather months of statements.
Cons: Requires an active CPA relationship; if accounting methodology results in a low net margin on paper, the P&L may actually understate real cash flow compared to what deposits show.
Side-by-Side Comparison
| Factor | Bank Statement | P&L Only |
|---|---|---|
| Income source | Averaged bank deposits | CPA P&L net income |
| CPA required? | No | Yes |
| Tax returns? | No | No |
| Min down payment | 10% | 10–15% |
| Min credit score | 620 | 620 |
| Best income type | High gross deposits | Strong net margin on books |
| Expense factor applied? | Yes (50% typical for business) | No — uses net income directly |
Which Should You Choose?
If your business deposits are high but your reported margins are thin, a bank statement loan usually produces more qualifying income. If your CPA books show healthy profit margins with a net figure that exceeds what 50% of your deposits would yield, a P&L only loan may be simpler and produce a higher qualifying number. The best answer comes from running both scenarios with your actual numbers — I do this for every client so we’re choosing based on math, not guesswork.
Frequently Asked Questions — Bank Statement vs. P&L Loan California
What is the difference between a bank statement loan and a P&L only loan?
Both are non-QM loan programs that bypass tax returns for self-employed borrowers, but they document income differently. A bank statement loan averages your monthly bank deposits over 12 or 24 months and applies an expense factor (typically 50% for business accounts) to arrive at qualifying income. A P&L only loan uses a CPA-prepared Profit and Loss statement, with the net income figure on the P&L used directly as qualifying income — no bank statements required. The better choice depends on which method produces higher qualifying income for your specific situation.
Do I need a CPA for a bank statement loan in California?
Not necessarily. A bank statement loan qualifies you on your deposit history alone — no CPA is required unless you want to provide a letter to document a business expense ratio lower than the lender’s standard assumption (typically 50%). A P&L only loan, by contrast, requires a CPA or licensed tax professional to prepare and certify the P&L statement that serves as your income documentation. If you don’t have an established CPA relationship, a bank statement loan is usually the more accessible path.
Which produces higher qualifying income — bank statement or P&L?
It depends entirely on your specific numbers. If your business deposits $300,000/year but your CPA’s P&L shows $120,000 net, the bank statement program ($300K × 50% = $150K qualifying) likely wins. If your P&L shows $180,000 net on $300,000 revenue because your actual expenses are low, the P&L program wins ($180K vs $150K). I pull both calculations for every client before recommending a program — there’s no universal answer without your actual figures.
Related: Self-employed mortgage hub | Bank statement loans | P&L only loans
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
