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in Vernon, CA
Vernon draws industrial business owners and contractors who don't fit traditional lending boxes. Both 1099 and bank statement loans work around standard W-2 documentation, but they verify income differently.
The right choice depends on how you structure your income and what documentation you can provide cleanly. Most borrowers qualify for one route more easily than the other.
1099 loans use your 1099 forms to verify income without tax returns. Lenders calculate your qualifying income from the gross receipts on your 1099s, typically allowing 50-100% of that amount depending on your industry.
This works best for contractors who haven't written off significant business expenses. Your 1099 shows higher income than your tax return would after deductions, giving you more borrowing power.
Most lenders require two years of 1099 history in the same field. Credit minimums typically start at 620, with rates running 1-2% above conventional depending on down payment and credit profile.
Bank statement loans calculate income from 12 or 24 months of personal or business bank deposits. Lenders typically use 50% of your average monthly deposits as qualifying income, assuming half covers business expenses.
This route works for business owners who take aggressive tax deductions or mix personal and business funds. Your deposits tell a different story than your tax returns show.
You need consistent deposit patterns without major unexplained fluctuations. Most programs allow credit scores down to 600, with better pricing at 680+. Rates typically run 1.5-2.5% above conventional.
The fundamental split comes down to documentation complexity. 1099 loans are simpler if you have clean contractor income and limited deductions. Bank statement loans handle messier situations but require more thorough underwriting.
Rate differences matter less than approval odds. A 1099 loan might price better, but if your 1099s don't support enough income, bank statements could show higher qualifying numbers despite the rate premium.
HousingWire just covered Rate's new RateFi product letting crypto holders use digital assets for non-QM qualification. That expansion shows where alternative income verification is headed beyond traditional 1099s and bank statements.
Choose the 1099 route if you receive contractor payments without major business expense write-offs. Your 1099 forms show solid income and you file taxes showing most of that as taxable earnings.
Go with bank statements if you write off equipment, travel, or home office expenses that reduce your taxable income significantly. Bank deposits reveal your real cash flow better than tax returns or 1099s.
Some borrowers qualify under both programs. We compare the numbers both ways to see which documentation path delivers better loan terms. Rates vary by borrower profile and market conditions.
Most lenders pick one documentation path per loan. We test both methods during pre-approval to see which shows stronger qualifying income for your situation.
Most non-QM programs start at 10-15% down, with better pricing at 20% or higher. Conventional loans can go as low as 3% down for comparison.
If you have both income types, lenders typically use W-2 income at face value and add 1099 income using their standard calculation. Bank statement loans might work better for truly mixed situations.
Tax deductions reduce qualifying income on 1099 loans and conventional mortgages. Bank statement loans bypass that problem by looking at deposits instead of tax returns.
Most 1099 programs start at 620 credit. Bank statement loans can go as low as 600, though rates improve significantly at 680 and above.