Top Programs For Business Owners

Going on my 4th year in the business as a mortgage loan officer, I have had the privilege of working with families from all walks of life and in practically every career position. That said, one of the few trends I have picked up on regarding business owners is that the best programs for them are not always your standard FHA or Conventional loans, but actually your Non-QM loans like the Bank Statement program or the P&L program. What these programs allow business owners to do is utilize more of their income by referencing their business bank statements or their Profit & Loss (P&L) reports. Given that one of the biggest obstacles for most first-time homebuyers is actually not qualifying for what they want to buy, this strategy is a fantastic opportunity for the business owner.

Now, these programs do have a catch in that their interest rates are slightly higher, and they also require six months of reserves. A reserve is essentially one mortgage payment, so lenders want to see six months’ worth of mortgage payments in your account prior to closing. This demonstrates to them that you have a financial cushion in case anything unexpected happens.

The Bank Statement program is one of my favorites because it doesn’t require you to go out of your way to get a P&L letter or tax transcripts in order to qualify. You just need your personal or business bank statements and a few other supporting documents. The lender will calculate your qualifying income based on an average of your deposits over the past 12 or 24 months, which is a huge advantage for business owners who deduct heavily on their taxes.

The P&L program is also great in that the underwriter will accept a profit and loss statement provided by your CPA, and they don’t need to review your tax returns. This can be especially helpful for clients who have had an unusual year or who simply prefer to keep their tax filings private. However, this program usually requires a larger down payment, with a 20% minimum in most cases.

Both of these programs provide flexibility and real solutions for entrepreneurs who otherwise may struggle to get approved through traditional underwriting. They acknowledge that self-employed income can look different on paper than it does in practice, and they offer a pathway for those business owners to access home financing without having to compromise on what they want.

-Enrique Flores