Loading
in Clearlake, CA
Both 1099 loans and bank statement loans solve the same problem: getting approved without W-2 income. The difference is how lenders calculate your qualifying income.
Most self-employed Clearlake borrowers fit one profile better than the other. Your income structure and business expenses determine which loan gets you approved faster and at better terms.
Both are non-QM products, so expect rates 0.5% to 1.5% higher than conventional loans. Rates vary by borrower profile and market conditions, but the income documentation process differs significantly between these two options.
1099 loans use your tax forms—specifically your 1099s and tax returns—to calculate qualifying income. Lenders take a two-year average of your adjusted gross income after deductions.
This works best if you write off few expenses and show strong income on paper. If you maximize deductions to lower your tax bill, your qualifying income drops proportionally.
Expect to provide two years of 1099 forms, personal and business tax returns, and a current P&L statement. Underwriters review line by line, which means longer processing than bank statement loans.
Credit requirements typically start at 620, though 680+ gets better pricing. Down payments range from 10% to 20% depending on credit profile and property type.
Bank statement loans skip tax returns entirely. Lenders use 12 or 24 months of business or personal bank deposits to calculate income.
Underwriters apply an expense ratio—typically 50% for personal accounts, 25% to 50% for business accounts. If your statements show $10,000 monthly deposits, lenders count $5,000 to $7,500 as qualifying income.
This program works for borrowers who write off heavy expenses or have inconsistent 1099 documentation. Your bank deposits tell the real income story, not your tax return.
You need consistent deposits across 12 to 24 months. Lenders flag large one-time transfers or irregular patterns that don't reflect ongoing business income.
The income calculation is where these loans split. 1099 loans use taxable income after deductions. Bank statement loans use gross deposits minus an expense percentage.
If you write off $60,000 annually to lower taxes, a 1099 loan counts your reduced AGI. A bank statement loan counts your gross deposits, then applies a 50% expense ratio—often resulting in higher qualifying income.
Documentation speed differs too. Bank statement loans skip tax transcripts and business returns. Underwriters review statements and verify deposits, which cuts processing time by one to two weeks.
Both require similar credit and down payment minimums. The real decision comes down to whether your tax returns or bank deposits show stronger income for qualification purposes.
Choose a 1099 loan if your tax returns show strong income and you claim minimal deductions. This works for contractors who prefer simple documentation and don't mind longer underwriting timelines.
Choose a bank statement loan if you write off significant expenses or have gaps in 1099 documentation. Self-employed borrowers with complex business structures almost always qualify for more with bank statements.
Run the numbers with both methods before applying. A broker can calculate your qualifying income using both 1099s and bank statements to show which gets you approved for the amount you need.
Most Clearlake self-employed buyers benefit from bank statement loans due to higher qualifying income. But if your tax returns already show enough income for your purchase price, 1099 loans offer slightly simpler documentation.
Yes, but lenders apply a 50% expense ratio to personal accounts versus 25% to 40% for business accounts. Business statements usually result in higher qualifying income.
Down payment requirements are similar for both—typically 10% to 20% depending on credit score and property type. The loan type doesn't change down payment minimums significantly.
Bank statement loans close one to two weeks faster on average. They skip tax transcript requests and business return analysis, which speeds up underwriting substantially.
Yes, if your qualifying income is too low with 1099 documentation. Expect to restart underwriting and provide 12 to 24 months of bank statements for the new calculation.
Both programs allow investment property purchases, though down payments increase to 20% to 25%. Rental income from the property doesn't offset qualification requirements for self-employed borrowers.