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in Willows, CA
Self-employed borrowers in Willows face a choice between two non-QM options that verify income differently. 1099 loans use your tax forms, while bank statement loans skip tax returns entirely and pull income straight from deposits.
Most self-employed borrowers favor one over the other based on how they structure deductions. If you write off heavy expenses, bank statements usually show higher income than your 1099s reflect.
Both loan types work in Glenn County for primary homes, second homes, and investment properties. Neither requires traditional W-2 paystubs or employer verification letters.
1099 loans underwrite income using your actual 1099-MISC and 1099-NEC forms from clients. Lenders average two years of 1099 income to determine what you qualify for, similar to how traditional loans treat W-2 wages.
This option works best if your tax returns reflect strong net income after deductions. You need at least two years of 1099 history in the same line of work, and most lenders require 15-20% down for purchases.
Rates typically run 0.5-1% higher than conventional loans. Credit score minimums sit around 620-640, though better scores unlock lower rates and more flexible terms.
Bank statement loans calculate income directly from business or personal account deposits over 12 or 24 months. Underwriters apply a percentage to total deposits—typically 50% for business accounts or 100% for personal—to estimate qualifying income.
This approach bypasses tax returns entirely, making it ideal for borrowers who maximize deductions and show minimal taxable income. You avoid the penalty of heavy write-offs crushing your debt-to-income ratio.
Most programs require 10-20% down depending on credit strength and property type. Rates run slightly higher than 1099 loans, usually 1-1.5% above conventional rates.
The core difference is documentation: 1099 loans require tax returns and forms showing reported income, while bank statement loans never touch your returns. If your Schedule C shows $60K net after $80K in deductions, bank statements might qualify you on $140K instead.
Down payment requirements vary slightly, with bank statement loans sometimes accepting 10% down for strong profiles. 1099 loans more consistently require 15-20% minimum across lenders.
Rate differences are marginal between the two, usually within 0.25-0.5% of each other. Bank statements edge higher due to the perceived risk of not verifying tax-reported income, but both cost more than conventional financing.
Processing time tends to favor 1099 loans since underwriters already know how to read tax documents. Bank statement loans require manual calculation of deposits and expense patterns, adding a few days to underwriting.
Choose 1099 loans if your tax returns already show strong net income and you have clean 1099 forms from multiple clients. This path costs slightly less and closes faster when your paperwork is straightforward.
Pick bank statement loans if you write off significant business expenses and your tax returns understate actual cash flow. This route also works if you have inconsistent 1099 documentation or mix income from multiple sources that complicate tax forms.
For Willows borrowers buying rural properties or homes on larger lots, both options handle non-standard properties equally well. Neither loan type restricts property types the way some portfolio products do.
Run both scenarios with a broker before committing. The difference in monthly payment between qualifying on 1099 income versus bank deposits can exceed $500 depending on your expense structure.
No, lenders choose one income calculation method per file. Mixing documentation types complicates underwriting and most lenders reject hybrid approaches outright.
1099 loans typically cost 0.25-0.5% less in rate, saving around $40-80 monthly on a $400K loan. Over 30 years, that compounds to $15K-30K in interest savings.
Yes, both programs approve rental properties with 20-25% down. Bank statement loans handle multiple rental income streams more smoothly than 1099 documentation.
Most lenders require 12 or 24 months of consecutive statements. Using 24 months sometimes qualifies you for better rates and lower down payments.
Yes, borrowers refinance between these products as their income documentation improves or changes. Rate savings must justify closing costs, typically requiring a 0.75% rate drop.