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in Monterey Park, CA
Both 1099 and bank statement loans serve self-employed borrowers in Monterey Park who can't show traditional pay stubs. The main difference is how you prove income: one uses tax forms, the other uses deposits.
Most self-employed buyers here face the same problem—strong income but weak tax returns after write-offs. These two non-QM options give you different ways around that issue.
Your choice depends on how you file taxes and which income picture looks stronger. One path uses what you reported to the IRS. The other uses what actually hit your account.
1099 loans use your tax returns to prove income—specifically your 1099 forms showing what clients paid you. Lenders look at one or two years of returns and calculate qualifying income from there.
This works best if you don't take heavy deductions. You need clean 1099 income that matches what you can actually afford monthly. Credit requirements typically start around 620.
Rates on 1099 loans run lower than most non-QM products because the income documentation is straightforward. You're showing the IRS exactly what you earned, which lenders trust more than alternative methods.
Bank statement loans skip tax returns entirely. Lenders review 12 to 24 months of business or personal bank statements and use deposits to calculate income.
This path makes sense when you write off most of your earnings. Your bank statements show actual cash flow before deductions crushed your taxable income. Lenders typically use 50-75% of deposits as qualifying income.
You'll pay higher rates than 1099 loans—usually 1-2% more. That premium buys flexibility when your tax strategy doesn't show enough income to qualify the traditional way.
The core split is tax strategy. 1099 loans reward conservative write-offs. Bank statement loans reward aggressive ones. If your Schedule C shows strong net income, go 1099. If deposits dwarf reported income, use bank statements.
Rates diverge by about 1-2% between these products. You trade that rate premium for income calculation flexibility. 1099 loans also close faster since tax returns are simpler to underwrite than months of bank data.
Documentation burden differs too. 1099 loans need returns and 1099 forms from clients. Bank statement loans require every page of 12-24 months of statements—personal, business, or both depending on how you run money.
Run this test: compare your net 1099 income from last year's return to your average monthly deposits times 12. If tax income is higher or close, use a 1099 loan. If deposits crush reported income, go bank statements.
Most Monterey Park buyers I work with choose based on their CPA's tax strategy. Consultants and contractors who file clean returns use 1099 loans. Business owners maximizing deductions use bank statements.
You can also mix strategies. Some lenders let you combine 1099 income with bank statement income if you have both types of earnings. This works well for borrowers with multiple income streams.
Some lenders allow it if you have multiple income sources. This works when part of your income shows clean on 1099s and part requires bank statements to capture.
Yes, most non-QM lenders want 15-20% down for either option. Down payment requirements match between 1099 and bank statement loans.
1099 loans typically close 3-5 days quicker. Tax returns are faster to underwrite than parsing months of bank statements.
Lenders average deposits over 12-24 months to smooth volatility. Large one-time deposits usually get excluded from income calculation.
Yes, but it restarts underwriting. If initial income calculations don't work, your broker can pivot to the other documentation method.