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in Los Angeles, CA
Los Angeles runs on self-employed income. From Culver City creatives to Downtown consultants, traditional W-2 verification doesn't work for most borrowers I see.
Both 1099 and bank statement loans solve the same problem—proving income without pay stubs. The difference is how lenders calculate what you earn and what documentation they need.
1099 loans use your tax forms to verify income. Lenders typically average your last two years of 1099 income without the aggressive write-offs that tank W-2 equivalent income on Schedule C.
This works best if you file 1099s cleanly and don't run significant business expenses through your personal tax return. Your adjusted gross income matters less than your gross 1099 receipts.
Most lenders want 620+ credit and 15-20% down. Rates run 1-2% above conventional, which is competitive for non-QM. You'll need CPA letters or transcripts to verify the 1099 forms are legitimate.
Bank statement loans calculate income from deposits. Lenders review 12 or 24 months of statements and apply a percentage (usually 50-75%) to account for business expenses you don't document separately.
This works when your bank deposits tell a better story than your tax returns. If you write off everything or run a cash-heavy business, bank statements can show higher income than your 1040.
Expect 10-20% down and 620+ credit minimum. Rates vary by borrower profile and market conditions but typically run similar to 1099 loans. Personal and business accounts both work—some borrowers blend both to maximize qualifying income.
Documentation is the main split. 1099 loans need tax forms and CPA letters. Bank statement loans need statements and nothing else—no tax returns, no 1099s, no profit and loss.
Income calculation varies more. 1099 lenders use your gross receipts with minimal deductions. Bank statement lenders apply a fixed percentage to deposits, which can help or hurt depending on your expense ratio.
If your business expenses run above 50%, bank statements usually calculate higher income. If you keep expenses lean and file clean 1099s, that route often qualifies you for more house.
Run the numbers both ways. Pull your last two years of 1099 income and compare it to 50% of your average monthly deposits times twelve. Whichever is higher is usually your better path.
Bank statement loans give you more control because you can choose which accounts to submit. Mix personal and business statements to optimize income. 1099 loans lock you into whatever you filed.
For LA borrowers buying in competitive neighborhoods, the difference between qualifying at $8,000/month versus $10,000/month is often the difference between Silverlake and Highland Park. Pick the loan that maximizes your income calculation.
No. Lenders pick one income calculation method per loan. You can apply through both programs and choose whichever approves you for more, but you can't blend the documentation.
Rates are nearly identical—both are non-QM products priced 1-2% above conventional. Your credit score and down payment affect rate more than which program you choose.
Yes. Both programs want 24 months in the same line of work. Lenders occasionally accept 12 months if you have strong credit and reserves, but that's not standard.
Lenders average the two years, so one down year gets smoothed out. If the trend is sharply downward, you'll need a letter explaining why income will stabilize.
Yes. Most lenders let you combine personal and business accounts to maximize deposits. Just make sure the statements cover consecutive months with no gaps.
Bank statement loans typically close quicker because there's no CPA letter or transcript delay. Expect 21-30 days for bank statements versus 30-40 for 1099 loans.