Trying to buy a home when you’re self-employed? It can be tough because you do not have regular pay salary slips like most people. That’s why lenders often ask for a CPA letter, a note from your accountant that says you do earn money and run a legit business.
In this article, we’ll talk about how to get a CPA letter, what needs to be in it, who can write it, how much it might cost, and why it matters when you’re applying for a mortgage.
What Is a CPA Letter, and Why Do Lenders Ask for It?
A CPA letter is a formal document prepared by a Certified Public Accountant confirming your income, self-employment status, or business activity. Lenders use it as a third-party verification of your financial standing, especially when traditional paychecks aren’t in the picture.
Think of it as someone vouching for you. Yes, this person runs their business properly, and here’s how much they make.
Who Needs a CPA Letter for Mortgage Loans?
Self-Employed Individuals
If you’re running your own business, even as a sole proprietor, mortgage lenders might ask for a CPA letter verifying income to confirm that your business is active and profitable.
Freelancers and 1099 Contractors
If your income is coming from multiple clients or projects, lenders can get uneasy. A self-employment letter proof income reassures them that you’re consistently earning.
Small Business Owners
Have a corporation or LLC? A CPA comfort letter can show that the income you’re claiming is real and “will not adversely affect the conduct of the business.”
Types of CPA Letters Used in Mortgage Lending
CPA Income Verification Letter
This is the most common type. It includes details like annual income, business name, and length of self-employment. A solid CPA income verification letter will clearly lay out gross and net income.
CPA Comfort Letter
Also known as a letter of comfort or comfort letter CPA, this doesn’t just verify income, it gives an overall sense of financial health. Think of it as a confidence booster for your lender.
CPA Letter Verifying Self-Employment
This type simply confirms that you’re self-employed, what kind of work you do, and how long you’ve been doing it. A letter of verification of self-employment can go a long way in building lender trust.
What Should a CPA Letter Include?
Key Elements of a CPA Letter for Mortgage
Whether you’re looking for a CPA letter or writing one from scratch, make sure it includes the essentials.
1. Personal and Business Details
- Your full legal name
- Business name
- Nature of the business
2. Confirmation of Income and Employment
- Gross and net income figures
How long you’ve been self-employed - Income consistency over the past few years
3. Certification Statement
A short line stating the information is true and accurate to the best of the CPA’s knowledge.
4. CPA Contact Information and Signature
Must include:
- CPA’s license number
- Contact info
- Signature and date
How to Get a CPA Letter for Mortgage
Working with Your CPA
Already have an accountant? Great. If not, now’s the time. Not all CPAs are familiar with mortgage letters, so make sure to ask about experience with CPA letters for home loans.
Drafting and Reviewing the Letter
Provide tax returns, profit & loss statements, and bank statements. The CPA will use these to prepare an accurate and reliable CPA letter for mortgage.
How Much Does a CPA Letter Cost?
Wondering how much a CPA letter costs? The price varies based on complexity and location, but ignitiontax CPA letter price ranges from $199 to $249.
Pro tip: Some CPAs include it in their annual services, always ask!
CPA Letter vs. Other Proof of Income Documents
You may be asked to show:
- Tax returns
- Bank verification of funds letter
- Employment verification letter for 1099 employees
- Profit and loss statements
Common Mistakes to Avoid in CPA Letters
- Missing CPA license number
- Using outdated templates
- Vague income descriptions
- Failing to include dates or income range
- Omitting business details
Make sure everything is correct. A messy letter could mess up your mortgage.
Does a CPA Letter Replace Tax Returns?
No, but it helps. Mortgage companies still verify tax returns, but a letter from a CPA can clarify things, especially if your income fluctuates or your deductions raise red flags.
CPA Letter and Third-Party Verification
Mortgage lenders love third-party verification. A 3rd party verification or even first-party verification by a CPA shows you’re not just making numbers up. It adds legitimacy and confidence to your application.
Final Thoughts
If you’re self-employed and house-hunting, a well-written CPA letter for mortgage lender can be the game-changer you didn’t know you needed. Whether it’s a comfort letter, income verification, or a letter verifying employment, getting it right makes the mortgage process smoother, faster, and way less stressful.
Frequently Asked Questions (FAQs)
1. What is the purpose of a CPA letter in mortgage applications?
To verify income and self-employment status through a trusted third party, giving lenders confidence in your financial health.
2. Can I write my own income verification letter?
Nope. It must come from a licensed CPA for credibility and to meet lender requirements.
3. Is a CPA comfort letter legally binding?
Not legally binding, but it holds professional weight. CPAs certify the info is accurate to the best of their knowledge.
