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in Commerce, CA
Commerce is a working city with industrial businesses, logistics companies, and independent contractors. Many borrowers here earn income outside traditional W-2 jobs.
Both 1099 loans and bank statement loans work for self-employed buyers. The right choice depends on how you document income and what shows up in your tax returns.
These are non-QM loans, meaning they don't follow conventional Fannie Mae or Freddie Mac rules. They give underwriters flexibility to approve borrowers conventional lenders would decline.
1099 loans use your 1099 forms to verify income instead of W-2s. Underwriters calculate qualifying income from the gross amounts reported on those forms.
This works well if you don't write off many business expenses. Contractors with minimal deductions show higher taxable income, which helps with approval.
Most lenders want 12-24 months of 1099 history. Credit scores typically need to hit 620 minimum, though some programs go lower with compensating factors.
Bank statement loans use 12-24 months of personal or business bank deposits. Lenders calculate income by averaging monthly deposits and applying an expense factor.
The expense factor accounts for business costs that don't show as separate line items. Most lenders use 25-50% depending on your industry and deposit patterns.
This option works better if you write off significant expenses. Your bank deposits show revenue before deductions hit your tax return.
You'll need consistent deposit patterns without large gaps. Lenders want to see stable income month over month, not erratic swings.
The main split is documentation type. 1099 loans need your forms and possibly tax returns. Bank statement loans need personal or business account statements.
Income calculation differs significantly. 1099 programs use reported income directly. Bank statement lenders average deposits, then subtract an expense percentage.
Rates vary by borrower profile and market conditions. Bank statement loans often price slightly higher because they require more manual underwriting and carry perceived higher risk.
Down payment requirements run similar for both, usually 10-20% minimum. Credit score floors overlap, though bank statement programs sometimes accept lower scores with larger down payments.
Choose 1099 loans if your tax returns reflect your true income. This works for contractors who don't heavily reduce taxable income through business expenses.
Bank statement loans fit better if you write off vehicles, home office, meals, or other deductions. Your deposits show what you actually earn before tax planning.
Many Commerce borrowers in logistics or warehouse management run lean businesses with high write-offs. Bank statement programs let those deposits count as income.
Talk to a broker before deciding. We review your actual documentation and run scenarios through multiple lenders to find which program delivers better terms for your situation.
Some lenders allow hybrid documentation, but most programs require one primary income verification method. A broker can shop lenders who offer flexibility.
Rates vary by borrower profile and market conditions. 1099 loans sometimes price slightly better because documentation is simpler and more standardized.
Most bank statement programs accept either. Personal accounts work fine if that's where your business deposits land.
Most lenders want 12-24 months of history. Two years shows income stability and reduces lender risk.
Lenders average deposits over the full statement period. Some variation is fine, but extreme swings can reduce your qualifying income.