Self-Employed Loans · 8 min read
CPA Letter for a Mortgage: What Lenders Need and Sample Wording
A CPA letter for a mortgage is a short letter from your accountant that confirms facts about your business: that it exists, that you own it, and how long you’ve been self-employed. On P&L loans the CPA also states the business income they calculated, and some loans ask for your expense ratio. A good letter is usually under a page and sticks to facts the CPA can stand behind. Here’s what to ask for, sample wording, and what to do if your CPA won’t sign.
Why lenders ask for a CPA letter
When you’re self-employed, nobody at an HR department can confirm your job. The CPA letter fills that gap. It gives the lender an independent, licensed professional who knows your business and will put their name on a few verifiable facts.
You’ll most often see it requested on bank statement loans and P&L loans, but conventional lenders sometimes ask for one too, especially when you plan to use business funds for your down payment.
The three kinds of CPA letters
Lenders use the phrase “CPA letter” for three different things. Find out which one your lender wants before you call your accountant.
- Self-employment verification letter. The most common. Confirms the business name, your ownership percentage, how long you’ve been self-employed, and that the CPA has prepared your tax returns or books. Lenders usually want at least two years of self-employment confirmed.
- Expense ratio letter. Used on business bank statement loans. Lenders apply an expense factor to your deposits, often 50% by default. If your real expenses are lower, a CPA letter stating your expense ratio can let the lender use the actual number, which raises your qualifying income.
- Use-of-business-funds letter. Needed when your down payment or reserves come from a business account. The lender wants comfort that pulling the money out won’t hurt the business. Many CPAs won’t sign this one; see below for the workaround.
What a CPA letter for a mortgage should include
- CPA firm letterhead with address and phone number
- The CPA’s name, license number and state of licensure
- Your full legal name and your business’s legal name
- Your ownership percentage
- How long you have owned or operated the business
- How long the CPA has prepared your returns or financials
- For an expense ratio letter: the expense ratio and the period it covers
- Date and signature
Lenders typically verify the CPA’s license online. In California that’s the Board of Accountancy’s license lookup, so make sure the license number on the letter is current.
Some lenders also accept letters from an enrolled agent (EA) or a licensed tax preparer instead of a CPA. Acceptance varies by lender, which is one reason we confirm the requirement before you ask anyone to write anything.
Sample CPA letter wording
This is a starting point to hand your accountant, not a form any lender requires. Your CPA will edit it to match what they can actually verify.
[CPA firm letterhead]
[Date]
To whom it may concern:
I am a certified public accountant licensed in the State of [State], license number [#]. I have prepared the federal tax returns for [Borrower name] for the tax years [years].
[Borrower name] owns [##]% of [Business legal name], which has been in operation since [month/year]. To my knowledge, the business is currently active.
[Optional, for bank statement loans:] Based on the business’s financial records for [period], business expenses were approximately [##]% of gross receipts.
Sincerely,
[Name, CPA]
[Signature]
Notice what it doesn’t say: it makes no promises about the future. It sticks to facts the CPA can verify. On a P&L loan, the CPA will also state the net income they calculated for the period.
If your CPA pushes back
In our experience it’s the exception: most CPAs are happy to provide a letter, especially when the request is simply a true picture of the business and its income. Where it gets tricky is the number. The CPA calculates the income, and occasionally their figure comes in lower than what’s needed to qualify, or they won’t word the letter the way a lender asks. Some firms also have policies against certain lender letters.
Options when that happens:
- Narrow the ask. Most CPAs will confirm the facts in the sample above, even if they won’t comment on cash flow or the safety of withdrawing funds.
- Use a business cash-flow analysis instead of a use-of-funds letter. Many lenders accept their own review of recent business statements.
- Use other proof of the business, such as a business license, Secretary of State filing or a city tax certificate.
- Switch programs. If the letter is the sticking point on a bank statement loan, a different lender, or a different program like a P&L loan, may not need the same letter.
How we use CPA letters in a loan file
Requirements for CPA letters vary more between non-QM lenders than almost anything else in a self-employed file. One accepts a tax preparer’s letter; another wants a CPA only. One uses your CPA’s expense ratio; another sticks with a fixed factor no matter what.
As an independent mortgage broker working with 20+ wholesale lenders, we match your file to a lender whose letter requirement your accountant can actually meet, and we send your CPA the exact wording that lender accepts. That one step saves a lot of back-and-forth.
When underwriters ask for a CPA letter
- To verify you’re self-employed and how long you’ve owned the business
- To support a P&L, where the CPA states the income they calculated
- To document a lower expense ratio on a business bank statement loan
- When you’re using business funds for your down payment or reserves
- When the automated underwriting system or the lender’s overlay simply requires one for self-employed files
Comfort letter vs. verification letter
There’s a reason a small number of CPAs say no. A “comfort letter” that asks the CPA to vouch for your ability to repay, or to predict how the business will do, goes beyond what accounting professional standards are comfortable with. A verification letter that sticks to facts the CPA knows (you own the business, how long it has operated, that they prepared your returns or your P&L) is a different thing, and that’s what most of our lenders actually need. Asking for the right one is most of the battle.
Do you need a CPA letter? A quick check
| Your loan | CPA letter usually needed? |
|---|---|
| P&L loan | Yes, the preparer’s P&L and often a letter |
| Business bank statement loan | Often, for self-employment or expense ratio |
| Personal bank statement loan | Sometimes, to verify the business |
| Conventional, self-employed | Occasionally, mainly for business funds |
| DSCR or asset depletion | Rarely |
About this article: Save Financial is a California-licensed independent mortgage brokerage (NMLS #377740, DRE #01875766) in business since 2009, with offices in Newport Beach and Marina del Rey, serving all 58 counties. We have closed hundreds of non-QM loans and shop 20+ wholesale lenders to match you with the right program. This article is general education, not a loan offer or commitment to lend. For a real quote, apply online or call 949-379-5320.