In this episode of Daily Mortgage Rates LIVE, we dive into the world of Profit & Loss (P&L) Loans, a powerful option for self-employed borrowers and business owners who rely on alternative forms of income documentation. Instead of traditional tax returns, P&L loans allow borrowers to use their profit and loss statements to prove income stability and qualify for financing.
We’ll discuss the ins and outs of these loans, including what lenders look for in a P&L statement, how to assess a borrower’s cash flow and expenses, and the key qualifications needed to secure this type of loan. Learn how this product is particularly valuable for those with fluctuating income or complex financial situations, and get tips on how to guide your clients through the process. If you're looking to deepen your expertise in alternative loan products, tune in to explore how Profit & Loss Loans can open up new opportunities for both borrowers and lenders!
For more episodes visit: https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast
About The Mortgage Calculator:
The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as over 5,000 Non-QM mortgage loan programs using alternative income documentation!
Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Al
The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!
Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank S
Episode Transcript
All right.
(00:00):
So welcome everyone.
My name is Kyle Hiersche.
I'm the COO of the mortgagecalculator joined here by our
president, Nick Hiersche, andour CSO Jose Gonzalez.
We are a lender that specializesin non QM loans.
And what we do every weekday onthe show at 11 a.
m.
Eastern is go through our livemortgage rates.
Then we do a deep dive into adifferent loan topic.
And today's topic is going to beprofit and loss loans.
Something we're very familiarwith here at the mortgage
(00:20):
calculator, because we In non Qand loans and work with a lot of
self employed borrowers.
So we'll get into that hereshortly, but first let's look at
the live rates.
So Nick, if you're ready, let'sgo ahead and pull up today's
live rates and see what they'relooking at.
All right.
So we'll check out the rates fortoday.
(00:41):
It is October 16th, just after11 AM Eastern.
So all of our initial ratesheets for the day.
Fire live.
We'll set up a basic scenario tocompare the APR.
If you'd like a full breakdown,full loan estimate with all the
fees itemized, please get withour team members.
They'd be happy to send thatover.
For our demo, we always set up asingle family home, single unit,
a 500, 000 purchase price, 400,000 loan amount corresponds to
(01:04):
80 percent loan, 20 percent downpayment.
And we set an estimated 760 FICOcredit score and an estimated 40
percent debt to income ratio.
So with those settings, let'scheck out today's rates.
About the same as it wasyesterday.
First up, our 30 year fixconventional for a primary home.
(01:26):
The most common option peoplethink of when they think of a
mortgage.
Rates coming in today, 6.
124.
Final APR, 6.
427.
Now, if there's any reason ourcustomer doesn't qualify for a
conventional option, wetypically want to quote an FHA
option to compare.
FHA allows more leniency oncredit issues and a higher debt
to income ratio, but doesrequire upfront and yearly
(01:46):
mortgage insurance.
Rates come in at 5.
25 when you add all the fees andmortgage insurance, finally PR
6.
205.
So if our customer qualifies forboth, they may consider FHA if
they're willing to do the, uh,upfront and yearly mortgage
insurance and our customers thatneed to use it.
Definitely a very good option.
The final APR is very comparableand our VA loans are only for
(02:11):
our eligible vets and activeservice members.
If you are eligible, theseprograms are definitely amazing.
Notice here, the APR is verylow.
Rates as low as 5.
5 final APR with a standardfunding fee comes in at 5.
798 definitely beats FHA orconventional or eligible vets
and active service members.
Definitely take advantage.
(02:33):
And we'll scroll down here tothe final standard program.
USDA is only for USDA eligibleareas.
That's the rural areas of thecountry.
If the property is eligible andthe customer is eligible, these
are great options to consider.
USDA comes in at 5.
375 today.
Final APR with all the fees 6.
113.
So as usual, uh, squeaks out FHAby a touch in most areas.
(02:55):
So definitely compare, uh, forour borrowers looking at FHA,
want to compare the USDA anddefinitely speaks out
conventional a little bit aswell.
So great option for those ruleproperties.
And that rounds out the standardoptions that every bank has.
Our customer doesn't qualify.
Unfortunately, most banks haveto deny them, but that's where
we love to work with our 5, 000plus programs, starting with our
(03:17):
non QM alt doc option.
So our customer doesn't qualify.
Uh, for conventional or FHAusing standard tax return
documentation, you need toswitch to alternative
documentation such as bankstatements, 1099s, uh, P& L
programs, all kinds of differentoptions.
Rates today for bank statementare similar, comes in at 6.
25, family car, 6.
578.
(03:38):
Just a touch above conventional,absolutely amazing, just switch
to alternative docs.
and nearly identical price.
So great option for ourborrowers that need that.
And we have our non QM alt docoptions for investment
properties and tons of otheroptions for investments we'll
look at.
So our bank statement or similarcomes in today, 6.
(03:59):
999 for investment property,final APR 7.
415.
So let's compare that to theother investment options.
So there are no, uh, governmentprograms, so no FHA, USDA, or
VA, but we do have conventional.
So conventional investment comesin at 6.
875 rate, final APR, 7.
211, which is beating our ALTDOF, which is typical, but not
(04:23):
beating our favorite programs,our DSCR, stands for Debt
Service Coverage Ratio.
No income or employmentinformation is needed.
We simply use estimated rentsfrom the appraisal to determine
a DSCR value of 5, 000.
The estimated rents cover theestimated expenses.
That is a positive DSCR ratio,aka the property cash flows
monthly.
For a property with a positivecash flow ratio and a three year
(04:46):
prepayment penalty, which isstandard, rates come in today,
6.
499, on a legal R, 6.
809, beating conventional byquite a bit there.
Absolutely amazing.
And we can even add a five yearprepay to some of our programs
to sweeten the deal.
Rates as low as 6.
375 today.
Final APR 6.
682, beating conventional byquite a bit.
(05:08):
And we also have a no prepaymentpenalty option as some states
don't allow it and somecustomers don't want one.
Final, uh, sorry, the ratesstart at, uh, 7%.
Final APR 7.
298, just a touch aboveconventional, but I'd still say
100 percent of investors wouldchoose a DSCR even if the cost
is substantially more.
And the final two options wealways show here are 30 year
(05:29):
fixed second mortgage.
Great option now as manycustomers have a lower mortgage
than what we're looking at herefor their first mortgage, but
still want to get some cash out.
No problem.
Use our 30 year fixed secondmortgage instead of a HELOC as
it is fixed and lower rates.
For a primary home, we can getour fixed second mortgage, get
cash out, rates as low as 8%,finally pay our 8.
370.
(05:49):
And same program for investmentproperties.
HELOCs are very rare forinvestments, so this is a great
option.
Right, so it's only 9.
375 to get cash out of thatinvestment property without
touching the first mortgage.
Final APR is 9.
716.
So those are some cool options.
Let's go ahead and Switch to ourtopic for today, which is our P&
(06:13):
L options.
So when we do our non QM demo,we typically pull up the bank
statement, which is the mostcommon, uh, largest, uh, set of
options there.
But our P& L is probably, uh,probably second place, uh, Maybe
there if the bank statement isan option.
So first Jose, let's talk aboutwhy would you use P& L versus
bank statement?
And then let's check out thelive rates.
(06:36):
Good morning, everyone.
Thank you for joining us fordaily mortgage rates like what
the mortgage calculator Uh, thethe profit and loss loan is the
solution when you have a bankstatement loan Where there are
unverifiable large depositsDeclining, uh, deposit trends,
declining income trends, uh, NSSoverdrafts, basically anything
(06:59):
that would be an issue, uh, whenyou're presenting the 12 months
of bank statements, right?
The P& L.
Uh, most P& L programs do notrequire, uh, any bank
statements.
Some do require bank statements.
So please do look at the, uh,guidelines, but, uh, it is the
workaround for when you arehaving issues with your bank
(07:20):
statement and obviously only forself employed borrowers.
So let's share the examples wehave for you today for our P& L
options.
Our first option here is at a 90percent LTV, which is the
maximum LTV.
Uh, for all non QM loans and aswith all non QM loans, never any
(07:44):
mortgage insurance, even thoughwe are above 80% loan to value,
our lowest cost option here is8.875 at 1.375 points, and our
lowest rate option 8.375 at acost of 2.375 points for a
(08:05):
primary purchase.
90 percent LTV.
Uh, for our investmentproperties, 85 percent LTV is
the maximum LTV.
8.
874 is our lowest cost option atpar.
And you can buy that all the wayto, down all the way to 7.
(08:27):
374 at a cost of 3.
25 points.
And for our profit and lossprimary cash out refi, 80
percent LTV is our maximum LTVunder the P& L program for any
cash out refis.
(08:48):
7.
875 is our lowest cost option ata quarter point.
And you can buy that down allthe way to 6.
875 at a cost of 2.
5 points.
And now our profit and loss cashout for investment properties.
Great news.
Also 80 percent LTV.
(09:09):
7.
875 is our lowest cost option ata quarter point.
And you can buy that down allthe way to 6.
499 at a cost of 3.
25 points.
And for our lower credit scoreborrowers, we do have 600 is our
(09:31):
minimum credit score for thisoption.
75 percent LTV is possible forthis primary cash out refi with
a 600 score.
11.
125 is our lowest cost option ata cost of half a point and you
can buy that down all the way to10.
25 at a cost of 2.
(09:53):
375 points for our primary cashout refi with a 600 credit
score.
And our last option here is theinvestment.
Profit and loss cash out againwith a 600 credit score.
11.
125 is our lowest cost option ata quarter point cost.
(10:15):
And you can buy that down allthe way to 9.
75 at a cost of 3.
125 points.
For our P& L cash out refi, 75percent LTV with a 600 credit
score, which is remarkable.
So do look to the mortgagecalculator for all your profit
and loss loans, non QM, andagency.
(10:41):
Alright, perfect.
I do not see any questions.
Go ahead and wrap it up here.
Remember that we do this at 11a.
m Eastern every weekday where wego through our live rates and
then we do a deep dive into adifferent loan type So we'll
have a new loan type to talkabout with you tomorrow.
Thank you everybody for tuningin We'll see you tomorrow at 11
a.
m.
Eastern for the next episode ofdaily rates live with the
mortgage calculator.
(11:02):
Take care everyone
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