We recently closed a loan for a real estate investor with multiple properties. As a self-employed individual, Tax returns can sometimes tell an incomplete story, leading to debt-to-income (DTI) challenges even for financially strong borrowers.
The Challenge: DTI Issues with Full Doc Underwriting
One of our self-employed clients was purchasing their sixth investment property. With a strong 741 FICO score and a conservative 70% loan-to-value (LTV) ratio, they had excellent qualifications. However, when their loan was processed using conventional full-doc underwriting (based on their tax return), their net reported income created a DTI issue, putting the loan at risk.
This investor required a solution that accurately reflected their true financial strength—without being limited by tax return income.
The Solution: One-Year P&L for Investment Properties
Our Non-QM One-Year Profit & Loss (P&L) Only feature provided the perfect solution. Instead of relying on tax returns, we used the borrower’s one-year unaudited P&L, prepared by a qualified CPA, to calculate income.
Key Benefits of This Approach:
- Higher Qualifying Income – The P&L showed more substantial earnings than the tax return, reducing the DTI to 38% (well below the 50% max limit).
- No Tax Return Required – The alternative income documentation allowed the borrower to avoid tax return limitations.
- Continued Portfolio Growth – With this solution, the investor successfully closed on their sixth investment property, expanding their real estate holdings.
One-Year P&L Program Highlights
Our One-Year P&L Only program is designed for self-employed borrowers and investors who need flexible income verification. Key features include:
- One-year unaudited P&L (must be prepared by a CPA, EA, or CTEC)
- 50% minimum business ownership required
- 720 minimum FICO score
- Loan amounts up to $2.0 million
- Cash-out refinance up to $1.5 million
- Available for primary residences, second homes, and investment properties
Grow Your Real Estate Portfolio with the Right Loan Solution
If you’re a self-employed investor facing DTI challenges due to tax return income, our One-Year P&L Only program could be the answer
Contact us to speak with a loan specialist!
