The short version
Pick by profile. Bank statements fit steady deposits. P&L fits low overhead with a cooperative CPA. Asset depletion fits large savings and little income.
Dane’s take
I run the same borrower through all three before I recommend anything.
When your tax returns don't show your real financial strength, choosing the right program is a strategy decision. Three main options approach the Ability to Repay rule (12 CFR § 1026.43(c)) from different directions:
- Bank statement loans turn 12 to 24 months of deposits into income, using a default or CPA adjusted expense factor.
- P&L only loans use a CPA prepared profit and loss statement to show your actual margin.
- Asset depletion loans turn savings and investments into monthly income using a divisor such as 60, 84, or 120 months.
The wrong choice can mean less buying power, a higher rate, or extra paperwork.
Side by side
| Bank Statement | P&L Only | Asset Depletion | |
|---|---|---|---|
| Main document | 12 to 24 months of statements | 12 to 24 month CPA P&L | Asset statements |
| Paperwork | Heavy (12 to 48 statements) | Moderate (P&L plus 2 statements) | Light (2 to 3 months of statements) |
| How income is found | Deposits minus an expense factor (15% to 50%) | CPA reported net profit | Discounted assets ÷ 60 to 120 |
| CPA needed | Only to lower the 50% factor | Required, must be independent | No |
| Rate | Non QM baseline | Often a little higher than bank statement | Often near the non QM baseline |
| Maximum loan to value | Up to 85% to 90% | Up to 80% to 85% | Up to 80% to 85% |
| Overdrafts matter? | Yes, strict limits | Less (2 months only) | No |
| Best fit | High deposits, steady cash flow | Low overhead, complex accounts | Large savings, little income |
One borrower, three programs
- Business: technology consulting, 100% owned.
- Gross deposits: $1,200,000 a year ($100,000 a month).
- Real overhead: 25%. Net profit: $900,000 a year.
- Tax return profit: $180,000 a year ($15,000 a month).
- Liquid assets: $1,500,000. Existing debts: $2,500 a month. DTI limit: 45%.
Option 1: bank statement loan, standard 50% factor
- Income: $100,000 × 50% = $50,000 a month.
- Maximum debt at 45%: $22,500. Minus $2,500 in debts = $20,000 a month for housing.
Option 2: bank statement loan with a CPA letter (25% factor)
- Income: $100,000 × 75% = $75,000 a month.
- Maximum debt at 45%: $33,750. Minus $2,500 in debts = $31,250 a month for housing.
Option 3: P&L only loan
- Income: $100,000 − $25,000 = $75,000 a month.
- Maximum debt at 45%: $33,750. Minus $2,500 in debts = $31,250 a month for housing.
Option 4: asset depletion (84 months)
- Assets: $1,500,000 × 80% = $1,200,000. Minus $350,000 for down payment, costs, and reserves = $850,000.
- Income: $850,000 ÷ 84 = $10,119 a month.
- Maximum debt at 45%: $4,554. Minus $2,500 in debts = $2,054 a month for housing.
What this shows
- Options 2 and 3 tie. Both reach $31,250 a month, about 56% more than the standard bank statement loan. The difference is paperwork. The P&L loan needs two bank statements. The CPA letter route needs the full statement set.
- The standard 50% factor costs the most here. Without a CPA letter, this low overhead business leaves a lot of buying power on the table.
- Asset depletion is the wrong tool. It is built for people with large savings and little income, not for an active business with strong cash flow.
Rates matter too. A P&L only loan can price a bit higher than a bank statement loan, so compare the full payment, not just buying power.
Speed and friction
Bank statement loans: a full audit
- Every page, transfer, and overdraft over 12 to 24 months is reviewed.
- Money moving between your accounts gets tracked so it isn't counted twice.
- Three active accounts can mean up to 72 statements.
P&L only loans: your CPA is the gatekeeper
- Statement volume drops to two bank statements.
- The risk moves to your CPA. If they're slow or won’t sign, the loan stalls. Confirm they will cooperate before you pick this path.
Asset depletion: the lightest paperwork
- Two to three months of asset statements. No business audit and no CPA letter.
Mixing income sources
Lenders often let you combine documentation types if one falls short of your DTI:
- Bank statements plus asset depletion: A business owner qualifying for a $6,000 payment adds $2,500 from asset depletion to reach $8,500.
- 1099 plus asset depletion: A consultant pairs 1099 income with income from a retirement account.
- P&L plus a W2 coborrower: A self employed borrower blends business income with a spouse’s salary.
How to choose
Choose a bank statement loan when:
- Your business has strong, steady deposits.
- Your overhead is high (50% or more), so the 50% factor helps you.
- Your CPA won't provide a letter.
Choose a P&L only loan when:
- Your overhead is low (under about 35%) and the 50% factor would penalize you.
- You have several accounts or entities that make a bank audit painful.
- You have an independent CPA of at least two years who will sign.
Choose asset depletion when:
- You have $1,000,000 or more in cash, investments, or retirement accounts.
- You're retired, semi retired, or between ventures.
- You want the lightest paperwork and no CPA letter.
Match the program to your strengths. Your cash flow, your accountant, and your savings each point toward a different loan.
Common questions
Which non QM loan has the lowest rate?
It varies, but all of them cost more than conventional loans.
Can I combine income types?
Often yes, like bank statements plus asset depletion.
Which one needs the least paperwork?
Usually asset depletion.