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in Covina, CA
Self-employed borrowers in Covina face a choice: prove income with 1099s or bank statements. Both are non-QM loans designed for people who don't get W-2s, but they verify your earnings differently.
The right option depends on how you run your business and what your paperwork looks like. 1099 contractors with clean tax returns go one route, while business owners with heavy write-offs usually go another.
1099 loans use your IRS 1099 forms to calculate income. Lenders look at your 1099 earnings over 12-24 months and average them. This works well if you're a contractor who doesn't write off much.
You need consistent 1099 income and decent tax returns. The loan follows your reported income closely, so heavy deductions hurt you here. Credit requirements typically start at 620, though some lenders want 640 or higher.
Bank statement loans skip tax returns entirely. Lenders analyze 12 or 24 months of business or personal bank deposits to calculate your income. They apply an expense ratio (typically 25-50%) to your deposits to estimate what you actually earn.
This loan type works for business owners who write off everything and show minimal taxable income. Your bank statements tell a different story than your tax returns. Rates run higher than conventional loans, and most lenders want 10-20% down minimum.
The core split: 1099 loans follow your tax returns while bank statement loans ignore them. If you claim $80K on your 1099s but deposit $150K monthly in your business account, bank statements show higher income. If your 1099s already reflect good income, that route is simpler.
Documentation differs significantly. 1099 loans need your actual forms plus tax returns. Bank statement loans require months of statements, often from multiple accounts. Processing time for bank statement loans runs longer because underwriters manually review every deposit.
Choose 1099 loans if your tax returns accurately reflect your income and you don't write off most of it. Independent contractors, consultants, and gig workers with clean 1099 income fit here. This path typically costs less and closes faster.
Pick bank statement loans when your business deductions crush your taxable income but your deposits prove you earn well. Restaurant owners, contractors with equipment write-offs, and cash-heavy businesses benefit most. You'll pay more in rate, but you can qualify with income your tax returns hide.
No, lenders choose one income calculation method per loan. You'll qualify using either 1099 forms or bank statements, not a combination of both.
1099 loans typically price better because the income documentation is cleaner. Bank statement loans carry more risk for lenders, so rates run 0.5-1.5% higher.
Most lenders want 24 months, but some accept 12 months of history. Shorter self-employment history usually means higher rates or larger down payments.
Minimum scores start around 620 for both programs. Better rates kick in at 680+, and you'll see the best pricing above 720.
Yes, both loan types work for investment properties. Expect higher down payment requirements, typically 20-25% for non-owner-occupied purchases.