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in Walnut, CA
Self-employed borrowers in Walnut face a documentation choice. 1099 loans verify income through tax returns. Bank statement loans skip tax returns entirely and use deposits instead.
Both programs work for consultants, contractors, and business owners. The best fit depends on how you report income and what's on your tax returns.
1099 loans verify income using tax documents — 1099 forms, Schedule C, or corporate returns. If your tax returns show strong income, this path often delivers lower rates than other non-QM options.
Lenders typically average two years of returns to calculate qualifying income. Credit scores start at 620. Down payments usually run 10-20% depending on the property type and borrower profile.
Bank statement loans skip tax returns. Lenders review 12-24 months of business or personal bank deposits to calculate income. They apply an expense ratio — usually 25-50% — to account for business costs.
This works when you write off most income or show losses on Schedule C. Expect higher rates than 1099 loans. Credit minimums sit around 600-640 depending on the lender.
The tax return question splits these programs. 1099 loans reward borrowers who show income on paper. Bank statement loans help those who minimize taxable income through deductions.
Rates on 1099 loans run 0.5-1.5% lower when your returns look strong. Bank statement loans charge more because lenders can't verify income the traditional way. Down payment requirements overlap — both typically ask for 15-20%.
HousingWire recently covered how Rate's new RateFi product lets non-QM borrowers count crypto holdings as reserves. That applies to both loan types if you hold digital assets.
Choose 1099 loans if your tax returns show two years of solid net income. You'll get better pricing and more lender options. Go with bank statements if you write off heavy expenses or show business losses.
Walnut's self-employed buyers — consultants in tech, contractors, small business owners — often split between both camps. Run the numbers with a broker who can compare actual rate quotes across both programs.
Some lenders allow blended documentation when one source doesn't fully cover the income you need. This works when you have partial tax return income plus deposits that fill the gap.
Either works. Business accounts get a lower expense ratio — usually 25-40%. Personal accounts see 40-50% because personal spending mixes in with business deposits.
One year works on some bank statement programs if deposits are consistent. 1099 loans almost always require two years of returns to calculate stable income.
Rates reflect risk. If your tax returns show strong income, 1099 pricing beats bank statement pricing every time. You can't negotiate down bank statement rates to match 1099 rates.
Yes. Once your tax returns show two years of qualifying income, you can refinance into a 1099 loan or even a conventional loan for better rates.