CPA Letter For Apartment Rental Or Home Mortgage – Complete Guide

By: ROS Team

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There are many reasons why buying New York City real estate is cumbersome and, at times, overwhelming, one of which is because there are so many things buyers have to learn before closing the deal. One of the unique things unique to NYC real estate is the

What is a CPA Letter?

This is a letter from a certified public accountant, or a CPA, to a prospective lender that vets a borrower’s financial health at the time they apply for a home loan.  Lenders need the letter before approving funds for a home loan. A CPA letter is one way borrowers are vetted so that lenders feel more comfortable approving the loan application. One notable point is that the CPA letters do not create ownership rights over assets and they are not likely to be legally binding.

It rarely happens, but there is a possibility that the lender will bring legal action against CPA if fraudulent information is included in a CPA letter.  That’s why the letter’s author needs to ensure that the letter is truthful and accurate.

CPA Letter for an Apartment

There has been an increasing trend that landlords ask tenants, primarily self-employed individuals, to submit CPA letters. First, they ask to estimate the applicant’s income. Then, they assess that statement to evaluate and determine whether they should consider the individual for tenancy or not.

CPA Letter for a Mortgage

Lenders ask borrowers to submit CPA Letters and their mortgage applications. They use this document to verify that CPA has reviewed the applicant’s tax returns and self-employed borrower. Additionally, they assess the statement to determine whether the loan should be approved.

CPA Comfort Letter Sample

From [Office Name]

Address

To: [Lender]

Address

Re: Verification of current income

To whom it may concern

This letter confirms that [applicant’s name] has been the owner of [company name] since 2019. He owns 100% of the company. The company is related to IT.

In 2020, [applicant’s name], total income was $80,000.

If you require any further assistance or information, please feel free to contact me.

Sincerely,

[CPA Name]

Most Frequently Asked Questions About CPA Letters

Are CPA Letters Legally Binding?

In most cases, CPA letters are not legally binding. It is quite rare to see a CPA letter for a mortgage with the intention of legally binding, but it can happen.

What Should the CPA Letter Include?

The letter should include:

  • Loan applicant’s name;
  • Name of applicant’s business or employer;
  • Address and phone number of business/employer;
  • Type of business;
  • Length of time applicant has owned business/been employed;
  • Percentage of ownership (if a business owner); and
  • The last tax year for which the CPA completed the applicant’s tax returns.

Why are CPA Letters Required to Apply for a Home Loan?

It’s possible the lender may demand a CPA letter from the borrower’s CPA before the loan application is processed. Most lenders request that the CPA letter indicate whether or not the applicant is the self-employed status or, if not, the applicant’s profession.

When is a CPA Letter Required?

There may come many occasions a lender or landlord may ask for a comfort letter. For example, lenders may require it for loan approval or any other party trying to verify the client’s income.

Is a CPA Legally Binding?

A CPA letter is not legally binding, but CPA should not verify incorrect information, or the lender may sue them in court.

Can a CPA Verify an Applicant’s Income?

Yes, CPAs can verify the income listed on the applicant’s tax return.  This is usually the most common request or expectation of a CPA during the applicant’s loan approval process.

Can a CPA Certify a Financial Statement?

In most states, only licensed CPAs are allowed to certify a financial statement. Financial statements should be prepared in accordance with official accounting guidelines.

What Happens if a CPA Discovers an Error on the Applicant’s Previously Filed Tax Return?

If the CPA finds an error on any previous year return, the CPA should notify their client of the error and work with him or her to correct the misstatement.

What is an Income Verification Letter?

This is a letter that verifies your annual income and employment information. The applicant’s CPA issues this letter to the lender for consideration during the loan application process. If the applicant does not have access to a CPA, he or she can ask a real estate attorney or real estate broker to get a verification letter prepared on their behalf.

How Can I Get a Sample CPA Letter?

You can request a sample CPA letter from your attorney or real estate broker.  It is certainly the easiest way to get it done. Remember, a real estate lawyer or broker may have experience in real estate, but CPAs are the subject matter experts when it comes to the financial side of things.

Can a Lender Waive the CPA Letter Requirement?

Lenders can waive the CPA letter requirement, but they rarely do so.

Is a CPA Letter Necessary to Get Approved for a Home Loan?

Getting a CPA letter is not an absolute requirement for home loan approval, but some lenders specifically ask for it.

It has been observed that nowadays, banks and lenders frequently demand income verification letters from self-employed persons. They demand this letter to confirm their profession and evaluate their income. The loan will be approved or not, depending on the assessment of the income statement.

The request should include:

  • The CPA-certified letter should project income
  • A CPA letter should verify that income is consistent with previous years.
  • CPA should verify employment
  • CPA should verify income
  • Financial estimate
  • CPA signed financial statement

Final Thoughts

Although every lender may not require a CPA letter, most New York City lenders won’t process home loan applications without it. With that in mind, you’ll want to add getting a CPA letter to your to-do list when buying property.

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