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in La Canada Flintridge, CA
Both loan types work for self-employed borrowers in La Cañada Flintridge, but they verify income differently. One uses your 1099 forms, the other uses bank deposits.
The choice depends on how your income flows and what documentation tells the cleanest story. Most independent contractors qualify for both, but one usually gets you better terms.
Neither loan cares about tax returns the way traditional mortgages do. That matters in a city where many professionals write off significant business expenses.
1099 loans use your 1099 forms to document income. Lenders add up your 1099s from the past year or two and apply a qualifying percentage, typically 90-100% of gross receipts.
This works best when most of your income comes through 1099s and those amounts are consistent. You need clean documentation with forms that match what clients actually paid you.
Rates run 1-2% higher than conforming loans. Minimum credit score sits around 620, with 15-20% down payment for most borrowers.
Bank statement loans use 12 or 24 months of business or personal bank statements. Lenders review deposits, apply an expense ratio (typically 25-50%), and qualify you on what remains.
This route works when your income hits your bank account but doesn't show up neatly on 1099 forms. Cash businesses, multiple income sources, and complex payment structures all fit here.
Expect rates 1.5-2.5% above conforming. Most programs want 640+ credit and 20% down, though 10-15% down options exist with stronger credit.
The core split is documentation style. 1099 loans need clean contractor forms that match your actual income. Bank statement loans need consistent deposits that prove cash flow.
Interest rates favor 1099 loans when you qualify for both, usually by 0.25-0.75%. That gap exists because 1099 documentation feels more concrete to underwriters than deposit analysis.
Bank statement loans accept messier income stories. Multiple clients paying via Venmo, cash deposits, mixed business and personal accounts—all workable. 1099 loans want cleaner paper trails.
Down payment requirements overlap, but bank statement loans offer more flexibility at higher credit scores. A 720 score might unlock 15% down options where 1099 loans still want 20%.
Choose 1099 loans when your income comes through clear contractor relationships and you receive proper tax forms. If three clients paid you $200K last year and issued 1099s, this is your path.
Pick bank statement loans when your income is real but messy. Cash-heavy businesses, multiple Venmo payments, or income sources that don't generate 1099s all push you toward statements.
Run both options with a broker who has access to multiple non-QM lenders. The rate difference might surprise you, and some lenders blend both documentation types for stronger applications.
In La Cañada Flintridge's price range, a 0.5% rate difference translates to real money over the loan term. Worth comparing both programs before choosing based on convenience alone.
Some non-QM lenders let you combine documentation types to show the strongest income picture. This works well when you have partial 1099 coverage plus additional bank deposits.
Personal bank statements work fine if they show your business deposits. Lenders just apply a higher expense ratio, typically 50% instead of 25-30% for business accounts.
1099 loans typically close 3-5 days faster because documentation is simpler to verify. Bank statement underwriting requires more analysis of deposit patterns and sources.
Lenders average the past two years or use the lower year, depending on the program. Bank statement loans give you more flexibility to show recent income recovery through deposits.
You can refinance between these programs anytime. Borrowers often start with bank statements, then move to 1099 loans once their contractor relationships stabilize and generate proper forms.