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in Hawthorne, CA
Both 1099 and bank statement loans serve self-employed borrowers in Hawthorne, but they verify income differently. Your business structure and how cash flows through your accounts determines which path works better.
If you're a contractor or freelancer here, you likely report 1099 income come tax time. But many self-employed borrowers write off so much they can't qualify traditionally, which is where these non-QM options step in.
1099 loans use your 1099 forms from the past 1-2 years to calculate qualifying income. Lenders typically average your gross 1099 income without the aggressive write-offs that tank your adjusted gross income on tax returns.
This works well if you receive consistent 1099s from a few clients and your income is steady year over year. You'll need 10-20% down depending on credit score, and rates run 1-2% above conventional mortgages.
Most lenders want to see the same or growing income trend. A spike one year followed by a drop raises flags about stability, even if your current year looks strong.
Bank statement loans analyze 12 or 24 months of personal or business bank deposits to calculate income. Lenders apply an expense ratio (usually 25-50%) to account for business costs, then use the remainder as qualifying income.
This option works best when deposits flow regularly but don't match 1099 reporting—think cash businesses, gig workers with multiple platforms, or contractors mixing personal and business accounts. You need clean statements with minimal NSFs or overdrafts.
Expect 15-20% down and rates about 1.5-2.5% above conventional. The trade-off is flexibility: your actual cash flow matters more than what you report to the IRS.
The core difference is what counts as income. 1099 loans need documented contractor payments on official forms. Bank statement loans just need money hitting your account regularly, regardless of source documentation.
Bank statement loans handle complex income better—multiple gigs, cash deposits, business commingled with personal funds. 1099 loans demand cleaner separation and formal contractor relationships.
Credit score matters more for bank statement loans since there's more interpretation in the income calculation. Most lenders want 680+ for bank statements versus 640+ for 1099 loans.
Processing time differs too. 1099 loans close faster because the income documentation is standardized. Bank statement loans require underwriters to analyze every deposit, which adds 1-2 weeks to closing.
Go with a 1099 loan if you're an independent contractor with a few steady clients who issue proper tax forms. It's cheaper and faster when your situation is straightforward.
Choose bank statement loans if you run a cash business, mix personal and business accounts, or earn through platforms that don't issue 1099s consistently. The flexibility costs more but solves income documentation problems traditional underwriting can't handle.
For Hawthorne borrowers juggling multiple income streams—maybe aerospace contract work plus side gigs—bank statements usually win. The local market has plenty of entrepreneurs mixing W-2 income, 1099 work, and small business revenue.
Some lenders blend both, using 1099s for documented income and bank statements to capture additional cash flow. This combo approach can maximize your qualifying income.
1099 loans typically price 0.25-0.5% lower than bank statement loans because the income verification is more straightforward. Rates vary by borrower profile and market conditions.
Both work for investment properties, but expect 20-25% down instead of 10-15%. Bank statement loans handle rental income mixed with business income better.
Most lenders want 6-12 months of mortgage payments in reserves for both programs. Investment properties push that to 12-18 months.
For bank statement loans, yes—you can submit multiple accounts to show total cash flow. Just be ready to explain any large or irregular deposits during underwriting.