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in Pomona, CA
Pomona's self-employed buyers often get stuck between two non-QM options. Both 1099 loans and bank statement loans skip traditional income verification, but they work very differently.
The right choice depends on how you pay yourself and what shows up in your accounts. Contractors with clean 1099s face different hurdles than business owners who run expenses through their bank.
1099 loans use your 1099 forms to verify income. Lenders average your 1099 earnings over one or two years, then apply that to debt-to-income ratios.
This works best if you're a contractor who receives clear 1099-MISC or 1099-NEC forms. The lender looks at gross receipts minus a standard percentage for expenses, typically 10-25% depending on your industry.
You'll need tax returns to match your 1099s. Most lenders want 620+ credit and 15-20% down for purchases in Pomona. Rates run 1-2% higher than conventional loans.
Bank statement loans use 12-24 months of business or personal bank statements. Lenders calculate deposits, subtract a percentage for expenses, then qualify you on what remains.
This option helps business owners who write off significant expenses. Your bank statements might show $20,000 monthly deposits even if your tax return shows far less net income.
You skip tax returns entirely on many programs. Credit requirements start at 620, but 680+ gets better pricing. Expect 10-20% down and rates 1.5-2.5% above conventional.
The main split is documentation. 1099 loans require forms that match your tax filings. Bank statement loans look only at what hits your account, regardless of what you reported to the IRS.
Expense treatment differs sharply. 1099 programs use fixed deduction percentages. Bank statement programs let lenders deduct 0-50% based on your business type, which can work for or against you.
Bank statement loans offer more flexibility but cost more. You'll typically pay 0.25-0.5% higher rates than comparable 1099 loans. That gap narrows if your credit exceeds 720.
Choose 1099 loans if you're a contractor with straightforward income and matching tax returns. This path costs less when your 1099s tell a clean story.
Pick bank statement loans if you run a business with heavy write-offs or your tax returns show low net income. Also use this if you haven't filed recent returns or your 1099 income fluctuates wildly year to year.
For Pomona buyers mixing both income types, some lenders blend the approaches. We've closed deals using 1099s for one income source and bank statements for another.
Yes. Bank statement loans don't require 1099s at all. They only look at deposits, so you can qualify even with 1099 income if that works better for your situation.
1099 loans typically run 0.25-0.5% lower than bank statement loans. Both cost more than conventional mortgages since they're non-QM products.
Most programs want two years. Some bank statement lenders accept 12 months if you have strong credit and larger down payments above 20%.
That kills a 1099 loan. Switch to bank statements instead, which don't cross-check against tax filings and only care about deposit history.
Yes. Both loan types offer 10-15% down options. Rates increase and you'll pay mortgage insurance, but approval is possible with strong credit.