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in Montebello, CA
Both loan types work for self-employed borrowers in Montebello who can't show traditional paystubs. The difference comes down to how you document income and what your tax returns look like.
1099 loans use your tax forms directly while bank statement loans bypass tax returns entirely. Your business structure and how you report income determines which path makes sense.
1099 loans use your 1099 forms and tax returns to calculate income. Lenders typically average your last two years of documented earnings to determine what you can borrow.
This works if you claim most of your income and don't write off everything. You need clean tax returns showing consistent earnings and a credit score above 620.
Documentation is straightforward: 1099 forms, tax returns, and profit-loss statements. Most lenders want to see stable or growing income year over year.
Bank statement loans use 12 or 24 months of business or personal bank deposits to verify income. Lenders analyze your deposits and apply a percentage to calculate qualifying income.
This option works when you write off significant expenses and show less income on tax returns than you actually earn. Your bank statements tell the real story of cash flow.
You need consistent deposits and typically a 640+ credit score. Rates run higher than conventional loans because lenders take on more risk without tax documentation.
The split comes down to your tax strategy. If you claim 70% of your earnings, a 1099 loan works fine. If you write off 60% as expenses, bank statements show income your tax returns hide.
Bank statement loans typically require larger down payments—often 15-20% minimum. 1099 loans can go as low as 10% down if your tax returns are strong.
Interest rates differ too. Bank statement loans run 0.5-1.5% higher because underwriters can't verify income through IRS records. You pay for flexibility with rate.
Choose 1099 loans if your tax returns reflect actual earnings and you don't max out business deductions. This path offers better rates and lower down payment requirements.
Go with bank statement loans if you write off most income but have strong cash flow through your accounts. You'll pay more upfront and in rate, but you can qualify with income that doesn't show on tax forms.
Most Montebello self-employed buyers we work with use bank statements. Contractors, restaurant owners, and consultants often minimize taxable income, making deposits the cleaner documentation path.
No, lenders choose one income documentation method. Some will review both and recommend the path that qualifies you for more.
1099 loans typically offer better rates because income verification follows traditional underwriting. Bank statement loans run higher due to increased lender risk.
Most lenders want two years of 1099s and tax returns. Some programs accept one year if income is strong and stable.
No, you can use personal account statements if all business income deposits there. Business accounts work too if that's where revenue flows.
1099 loans typically require 620 minimum. Bank statement programs usually start at 640, with best rates at 680 or higher.