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in Pasadena, CA
Both 1099 loans and bank statement loans serve self-employed borrowers who can't prove income through W-2s. The right choice depends on how your business runs and what documentation you actually have.
Pasadena's tech contractors and creative professionals often struggle with traditional mortgage approval. These two non-QM options open doors that conventional loans keep shut.
Your income structure matters more than your total earnings. A freelancer with clean 1099s faces different hurdles than a business owner running expenses through their checking account.
1099 loans verify income using your 1099-MISC and 1099-NEC forms from clients. Lenders typically average your 1099 income over one or two years to calculate what you can borrow.
This works best for independent contractors with straightforward income streams. If most of your earnings come through 1099s without major business deductions, this path is cleaner.
You'll need good credit—usually 620 minimum, though 680+ gets better rates. Rates vary by borrower profile and market conditions, but expect pricing above conventional loans.
The approval process looks familiar. Lenders review your 1099s like they'd review W-2s, making this the simpler route if your income documentation is clean.
Bank statement loans analyze 12 to 24 months of business or personal bank deposits. Lenders calculate your monthly income by reviewing your account activity instead of tax returns.
This path suits business owners who write off major expenses. If your tax returns show low income but your bank statements show strong cash flow, this option works.
Credit requirements mirror 1099 loans—620 minimum, better pricing at 680+. You'll typically put down at least 10%, sometimes 20% depending on the lender.
The underwriting takes longer. Analysts manually review every deposit, flagging transfers between accounts and one-time windfalls that don't count as stable income.
Documentation complexity separates these loans. 1099s are clean and simple—either you have them or you don't. Bank statements require deeper analysis of every transaction.
Income calculation differs sharply. 1099 loans use your reported income directly. Bank statement loans apply a percentage (often 50-75%) to your deposits to account for business expenses.
Business structure matters. Sole proprietors with 1099s often prefer 1099 loans. LLC or S-corp owners running expenses through business accounts lean toward bank statement loans.
Approval speed varies. 1099 loans close faster because verification is straightforward. Bank statement loans need extra time for underwriters to analyze deposit patterns and separate business from personal funds.
Choose 1099 loans if you're an independent contractor with consistent 1099 income and minimal business deductions. This works for Pasadena consultants, designers, and tech contractors who don't run major expenses.
Pick bank statement loans if you own a business with significant write-offs. Restaurant owners, retail operators, and contractors with equipment costs often show more income through bank deposits than tax returns.
Your tax strategy reveals the answer. If your CPA minimizes taxable income through legitimate deductions, bank statements show your real earning power. If you report most income directly, stick with 1099 loans.
Neither option guarantees approval—credit, assets, and debt ratios still matter. But matching your documentation to your business structure gets you the cleanest path to closing.
Some lenders allow hybrid approaches, but most require you to pick one verification method. Mixing documentation types complicates underwriting without improving your approval odds.
Rates vary by borrower profile and market conditions, but 1099 loans typically price slightly better. The simpler documentation reduces lender risk, which can translate to lower rates.
Most lenders want two years of self-employment history for either loan type. Some accept one year if you worked in the same field as a W-2 employee before going independent.
Lenders average your income, but extreme volatility raises red flags. Bank statement loans handle inconsistent income better since they show recent cash flow trends.
Yes, you can refinance between loan types anytime. Many borrowers start with bank statements, then switch to 1099 loans once their tax returns show higher income.