Understanding Profit and Loss Qualification Mortgage

If you’re self-employed and looking to buy a home, you may find it challenging to qualify for a mortgage. Lenders typically require W-2 income documentation to determine whether you can afford to make your mortgage payments. However, if you’re self-employed, you may not have W-2 income, which can make it difficult to qualify for a traditional mortgage. This is where Profit and Loss (P&L) qualification mortgage comes into play.

What is a Profit and Loss Qualification Mortgage?

A Profit and Loss qualification mortgage is a type of mortgage loan that allows self-employed borrowers to qualify for a mortgage using their profit and loss statements. This type of mortgage loan is also known as a non-QM mortgage loan because it does not meet the requirements of the Qualified Mortgage (QM) rule set by the Consumer Financial Protection Bureau (CFPB).

With a P&L qualification mortgage, you’ll be required to provide two years of tax returns and/or profit and loss statements to verify your income. The lender will then use the average of your net income over the two-year period to determine your qualifying income.

Benefits of a Profit and Loss Qualification Mortgage

One of the main benefits of a P&L qualification mortgage is that it provides more flexibility in qualifying criteria than a conventional mortgage. For example, P&L qualification mortgages may allow for higher debt-to-income ratios and may not require you to have a high credit score to qualify.

Additionally, P&L qualification mortgages can be a good option for self-employed borrowers who have fluctuating income or who have recently started their business. These borrowers may have difficulty qualifying for a conventional mortgage because their income may not be stable or consistent enough to meet the requirements of a traditional mortgage.

Considerations for a Profit and Loss Qualification Mortgage

While P&L qualification mortgages can be a good option for self-employed borrowers, it’s important to keep in mind that they may come with higher interest rates and fees compared to conventional mortgages. This is because P&L qualification mortgages are considered non-QM loans and may be riskier for lenders.

It’s important to carefully consider your options and compare the terms and costs of different types of mortgage loans before making a decision. Working with a knowledgeable mortgage professional can also be helpful in navigating the loan process and finding the best loan option for your individual needs and circumstances.

Apply for a Profit and Loss Qualification Mortgage with Bridgeview Mortgage

If you’re self-employed and interested in a P&L qualification mortgage, Bridgeview Mortgage can help. Our experienced mortgage professionals can guide you through the loan process and help you find the best loan option for your unique needs and circumstances.

Learn more about P&L qualification mortgages options today!