If you own a business, run a medical or legal practice, work as a 1099 independent contractor, or manage multiple entities in California, your CPA's job is to legally minimize your taxable income. Unfortunately, traditional bank and agency mortgage underwriters read the bottom line of your tax returns after every depreciation schedule, Section 179 deduction, and business write-off has been subtracted.
At West Shores Financial, our 12 and 24-Month Bank Statement, CPA P&L, 1099, and Asset Depletion Non-QM mortgage programs evaluate your real-world cash flow so you can purchase or refinance a California primary residence, second home, or investment property without amending your tax returns.
4 Non-QM Income Qualification Tracks for Self-Employed Californians
| Program Type | Required Documentation | How Qualifying Income Is Calculated |
|---|---|---|
| 12 or 24-Month Business Bank Statement Loan | 12 or 24 consecutive months of business bank statements (no tax returns or 4506-C transcripts). | Total eligible business deposits averaged over 12 or 24 months, multiplied by your ownership percentage, minus a standard (e.g., 50%) or CPA-certified third-party expense factor. |
| 12 or 24-Month Personal Bank Statement Loan | 12 or 24 consecutive months of personal bank statements plus 2 months of business statements showing business activity. | 100% of eligible monthly deposits/transfers from your business into your personal account averaged over 12 or 24 months. |
| 1099 Earner Mortgage Program | 1 or 2 years of IRS Form 1099s plus year-to-date earnings verification or bank statements. | Typically 90% of gross 1099 income (10% flat expense factor) without requiring tax returns or Schedule C net income. |
| CPA P&L Only & Asset Depletion Programs | 12 or 24-month Profit & Loss statement prepared and signed by a licensed CPA, EA, or CTEC, or verified liquid investment accounts. | Net income per CPA P&L or annuitized liquid assets over the loan term/qualifying period. |
How to Prepare Your Bank Statements Before Applying
Before our underwriting team runs your complimentary 12 or 24-month deposit analysis, keep these best practices in mind:
- Keep Business and Personal Accounts Separated: Clean monthly transfers from your business operating account to your personal checking account give you the option to compare both Personal and Business Bank Statement calculations and choose the stronger number.
- Avoid Unexplained Non-Revenue Transfers: Inter-account transfers, loan proceeds, or one-time equipment sales are backed out of gross revenue calculations. Keeping a separate account for tax reserves or credit lines speeds up underwriting review.
- Coordinate Your CPA Expense Letter Early: If your service, consulting, medical, real estate, or technology business operates at a lower overhead margin than 50%, a simple CPA expense ratio letter confirming your business's actual operating expense percentage can substantially increase your qualifying buying power.
- Compare Bank Statement vs. DSCR for Investment Properties: If you are buying a primary residence or second home, Bank Statement and 1099 loans are the premier Non-QM tools. If you are buying a rental property, compare a Bank Statement loan directly against a California DSCR Investor Loan, which requires zero bank statement income calculation at all.
Check Your True California Buying Power Today
Ready to see exactly how your 12 or 24-month deposits translate into California purchasing or refinancing power? Explore our RateZen California Buying Power & Refinance Guide or book a confidential 15-minute review with Isaac Grajeda.
Related West Shores Financial & Investor Resources
- California DSCR Loans for Real Estate Investors: Cash-Flow Qualification & LLC Vesting
- 5-to-8 Unit Multifamily Apartment Loans in California
- 6 Questions High-Income W-2 Earners Should Ask Their CPA Before Buying a California Rental Property
- Short-Term Rental (Airbnb) Financing in California
- California Home Buying Power & Refinance Breakeven Guide
Frequently Asked Questions
How do 12-month and 24-month bank statement loans calculate qualifying income in California?
Instead of using net taxable income from your IRS Form 1040 or Schedule C/K-1, underwriters average your eligible monthly business or personal bank deposits over 12 or 24 consecutive months and apply a standard or CPA-verified expense factor (combined with your ownership percentage) to determine your qualifying monthly income.
What is the difference between a Personal Bank Statement Loan and a Business Bank Statement Loan?
A Personal Bank Statement Loan reviews 12 or 24 months of deposits into your personal checking account (often counting 100% of verified transfers from your business account), while a Business Bank Statement Loan reviews your operating business statements and applies an expense ratio based on your industry and CPA letter.
Can I qualify using a CPA-prepared Profit & Loss (P&L) statement or 1099 forms?
Yes. West Shores Financial offers 1-year and 2-year 1099 Earner programs for independent contractors, medical professionals, and commissioned sales executives, as well as CPA/EA-prepared P&L programs for established self-employed borrowers.
Can Bank Statement and Non-QM loans be used for both primary residences and investment properties?
Yes. You can use Bank Statement, CPA P&L, 1099, or Asset Depletion Non-QM financing to purchase or refinance a California primary residence, vacation second home, or rental investment property.