What Documentation Is Needed for Profit and Loss Mortgage Loans

The P&L must cover the most recent 12-month period and the P&L end date must be less than 90 days old at closing. Some programs, like our Sharp, require the end date to be less than 60 days old at closing.

The P&L statement must be completed by an independent Third Party Certified Public Accountant (CPA), an IRS Enrolled Agent (EA), or a CTEC registered tax preparer (PTIN). Statements prepared by the borrower are not permitted under any circumstances.

The P&L statement(s) must be signed by both the borrower(s) with ownership and the CPA/EA/CTEC.

If the loan date will be more than 120 days removed from the end date of the most recent tax returns provided, a year-end and/or year-to-date P&L statement and balance sheet is required.

No, tax returns and 4506-C are not required for the P&L Statement Only program. If tax returns and/or transcripts are provided, the loan will often be ineligible.

Yes, a Verbal Verification of Employment (VVOE) must be obtained for self-employed borrowers, typically within 30 calendar days prior to the note date.

The minimum 25% ownership (or 50% for some programs) must be documented via a CPA letter, Operating Agreement, or equivalent.

A signed written business narrative is required which must include details like the description of business operation, primary products/services, customer base, and number of full-time employees. An internet search of the business is also required.

Verification that the borrower’s business is fully operational/active is required within 10 calendar days of closing in some programs, or 30 calendar days prior to the note date in others.

The CPA/EA/CTEC preparer must attest that they prepared the borrower’s most recent tax returns and that they have performed either an audit or a review of working papers provided by the borrower.