Loading
in Madera, CA
Both 1099 and bank statement loans serve self-employed borrowers in Madera, but they verify income differently. One uses your tax forms while the other reads your actual cash flow from deposits.
The right choice depends on how you structure your business deductions and what shows stronger income. Most self-employed borrowers qualify for one but not both at favorable terms.
1099 loans use your tax returns to calculate qualifying income, just like traditional mortgages. Lenders average your net profit after deductions across one or two years of returns.
This works well if you take minimal write-offs and show strong documented profit. You'll need solid credit—typically 620 minimum—and lower debt ratios since your taxable income determines approval.
Bank statement loans analyze 12 or 24 months of business or personal bank deposits to prove income. Lenders apply percentage calculations to your average monthly deposits—usually 50% for expenses, sometimes less.
This route often shows higher qualifying income than tax returns because it captures gross revenue before deductions. Credit requirements match 1099 loans, but the income calculation tends to be more generous for aggressive tax planners.
The core split is what income source gets analyzed. 1099 loans read what you reported to the IRS as profit. Bank statements read what actually hit your accounts before any deductions.
If you write off every possible expense to minimize taxes, bank statements will show 30-50% more qualifying income in most cases. If you structure lean with high reported profit, 1099 documentation may yield better debt ratios and slightly lower rates.
Pull your last two years of tax returns and compare net profit to your average monthly deposits times 12. If deposits are significantly higher, bank statement loans will qualify you for more house.
If your net profit after deductions already looks strong—say you're showing $120K taxable versus $180K in deposits—the 1099 route may offer slightly better pricing. Run both scenarios before locking a path.
No. Lenders pick one income documentation method per file. You'll choose whichever shows stronger qualifying income for your situation.
Rates are typically similar since both are non-QM products. Pricing depends more on credit score, down payment, and loan amount than documentation type.
Expect 10-20% down minimum for both. Lower credit scores or higher loan amounts push you toward 20% down regardless of income method.
Lenders exclude non-income deposits like transfers or loans. Only revenue deposits count, so keep clear records separating business income from capital moves.
Timelines are nearly identical—30 to 45 days typically. Bank statement loans require a bit more underwriting review but rarely delay closing dates.