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Preparing a profit and loss statement for a mortgage
A self-employed mortgage applicant may need a current business profit and loss statement. Obtain the loan officer’s document request first, then prepare a report that can be traced to the books.
This guide describes common bookkeeping practice, not a legal or regulatory requirement.
Last reviewed:
General information, not legal or tax advice.
Confirm why the lender wants current results
Fannie Mae permits audited or unaudited profit and loss statements to support a lender’s assessment of income stability and continuance. A year-to-date statement is not required for most businesses, but the lender may request it when the application is more than 120 days after the business tax year ends.
Sources: Fannie Mae Selling Guide B3-3.7-04
Build the report from reconciled activity
Fannie Mae describes a typical profit and loss layout as similar to Schedule C. As bookkeeping preparation, review sales, expenses and the period cutoff before producing the report. Keep the basis and covered dates visible, and explain unusual items rather than editing income to match a desired loan result.
Sources: Fannie Mae Selling Guide B3-3.7-04
Align the packet with returns and transcripts
Fannie Mae describes verification through signed returns or IRS-issued transcripts. IRS IVES releases tax records to a lender only with taxpayer consent. Compare the report with filed-return history and identify adjustments, while letting the lender specify the periods and authorizations it needs.
Sources: Fannie Mae Selling Guide B3-3.2-01; IRS - IVES
Route assurance requests to the appropriate adviser
Tidwell can prepare internal statements from the books and organize supporting schedules. If the lender requests a CPA letter or an assurance engagement, take the exact wording to a CPA. Keep that request distinct from bookkeeping preparation and ask the loan officer to clarify any ambiguous certification language.
Sources: confirm why the lender wants current results
Related records and decisions
Prepare current reports for the loan officer
Tidwell helps reconcile the books and organize supporting schedules for your business decisions. We work with your CPA on tax questions and the financial records they need.