CPA Letters & Profit/Loss Statements

How accountant-prepared documents are used across bank statement, 1099, P&L, and asset depletion mortgage programs

CPA letters and profit/loss statements provide third-party validation of your business income and finances. Their role varies significantly depending on which loan program you’re using—from optional (but helpful) in some programs to the central qualifying document in others.

CPA Letters

A CPA letter is a statement from your accountant confirming details about your business and income. Lenders use these to verify information that other documents alone don’t establish.

A CPA letter typically confirms:

• You are self-employed in the stated business
• Length of time in business
• Your ownership percentage
• The business is currently operating
• Actual expense ratio (if applicable)

Sample language: “I have prepared tax returns for [borrower name] for the past three years. They are the 100% owner of [business name], a consulting firm operating since 2019. Based on my review of their financials, their business expenses average 25% of gross revenue.”

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Bank Statement Loans

For bank statement loans, CPA letters and P&Ls are optional but can meaningfully increase qualifying income.

Without documentation, lenders apply default expense factors based on industry—often 40-50%. A CPA letter stating your actual expenses are lower can reduce that factor and increase qualifying income.

Example on $400,000 annual deposits:

Expense Factor	Qualifying Income
50% (default)	$200,000
25% (CPA-verified)	$300,000

That $100,000 difference substantially increases borrowing power.

A CPA-prepared P&L covering the same period as your bank statements can serve the same function—providing a formal accounting of revenue and expenses that supports the lower expense factor. Some lenders require the P&L to be reviewed or audited rather than simply prepared.

Consider getting a CPA letter or P&L for bank statement loans if:

• Your actual expenses are lower than industry defaults
• Your business type typically triggers high default expense factors
• The lender offers a reduced expense factor with supporting documentation

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1099 Loans

For 1099 loans, a CPA letter plays a supporting role. The primary income documentation is your 1099 forms, but lenders often require or request a CPA letter to confirm self-employment status and that the business is currently active.

If the lender applies an expense factor to your 1099 income (typically 10-25%), a CPA letter documenting your actual expenses can justify using a lower rate—the same mechanism as with bank statement loans, but less impactful since 1099 expense factors are already modest.

A P&L can also be submitted as supplemental documentation, particularly if your 1099 income and bank deposits don’t align closely and you need to explain the discrepancy.

Typical CPA letter use for 1099 loans:

• Confirms self-employment and business operation (often required)
• Supports a lower expense factor if one is being applied
• Provides supplemental context when 1099 totals and deposits diverge

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P&L Loans

For P&L loans, the CPA-prepared profit and loss statement is the primary qualifying document. This is the most CPA-intensive of the four programs—the loan is built around the accountant’s work.

The P&L must meet specific lender requirements:

Requirement	Detail
Prepared by	Licensed CPA (not self-prepared)
Coverage period	Most recent 12 or 24 months
Contents	Itemized revenue and expenses, net profit
Preparation date	Within 60-90 days of application
Format	Some lenders require reviewed or audited statements

The net profit figure on the P&L becomes the qualifying income base. Because actual expenses are used rather than an estimated factor, borrowers with genuinely low overhead often qualify for more under a P&L program than under bank statement programs.

What lenders look for in the P&L:

Element	Purpose
Gross revenue	Should align with other income documentation
Itemized expenses	Establishes actual expense ratio
Net profit	Becomes qualifying income
Preparation date	Confirms recency
CPA signature and letterhead	Establishes credibility and accountability

A CPA letter is typically submitted alongside the P&L to confirm ownership percentage, years in business, and current operating status.

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Asset Depletion Loans

For asset depletion loans, CPA letters and P&Ls are the least central of the four programs. Qualifying income is calculated from liquid assets—not from earned income—so there’s no expense factor to justify or income to document through financial statements.

That said, CPA letters still appear in asset depletion applications in two situations:

Self-employment verification — If you are self-employed, lenders typically require a CPA letter confirming your business is active and operating. This is standard across all programs for self-employed borrowers, regardless of how income is calculated.

Combined income sources — Many borrowers use asset depletion alongside another income stream (bank statement income, rental income, etc.). If that second source is self-employment income, the CPA letter and potentially a P&L play their usual role for that portion of the qualification.

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Cost and Timing

CPA letters typically cost $100–300 and can usually be prepared within a few days. A full P&L statement takes longer—plan for one to two weeks if your accountant needs to compile financials from scratch.

For P&L loans specifically, do not wait until you have a purchase contract to engage your CPA. The preparation time and the 60-90 day recency requirement mean you should begin early in the process.