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in Merced, CA
Both 1099 loans and bank statement loans help self-employed Merced borrowers qualify without W-2s. The right choice depends on how clean your 1099s look versus what actually hits your bank account.
Most self-employed buyers I work with in Merced County max out their business deductions. That tanks their 1099 income on paper. Bank statement loans ignore your tax returns and use actual deposits instead.
1099 loans qualify you based on the income reported on your 1099 forms from the past two years. Lenders average those numbers to calculate what you can borrow. You need consistent 1099 income and solid tax returns showing that income.
This works if you don't write off much against your business income. Your 1099s show strong reported earnings. Credit requirements typically start at 620, with 15-20% down for most Merced properties.
Bank statement loans use 12 or 24 months of personal or business bank statements to verify income. Lenders calculate deposits, apply an expense ratio (typically 25-50%), and that's your qualifying income. No tax returns required.
This route works when your actual cash flow beats what you report after deductions. Credit starts around 620-640. Expect 10-20% down depending on the strength of your deposits and overall profile.
The biggest split: 1099 loans care what you reported to the IRS, bank statement loans care what landed in your account. If you write off 40% of your revenue, your 1099s show 60% as income. Bank statement lenders see 100% of deposits before applying their own expense ratio.
Rates vary by borrower profile and market conditions. Bank statement loans typically price 0.5-1% higher than 1099 loans because underwriting relies on less verified documentation. Both require solid credit and reasonable down payments for Merced properties.
Choose 1099 loans if your tax returns show strong income and you don't heavily deduct business expenses. The documentation is simpler and rates run lower. Choose bank statement loans if you maximize deductions and your deposits significantly exceed your reported income.
I see plenty of Merced self-employed buyers who think they need bank statements when 1099s would actually work better. Run both scenarios. Sometimes your 1099 income qualifies you just fine, and you save money on rate. Other times, bank statements unlock 30-40% more buying power.
No. Lenders pick one income method per loan. You can't blend the two to boost qualifying income. Choose the method that shows your income strongest.
Personal accounts work fine if your income deposits flow through them. Business accounts also qualify. Lenders just need consistent deposit history showing your earnings.
1099 loans typically close slightly faster because documentation is more standardized. Bank statement loans need more underwriter review of deposit patterns. Both usually close in 30-40 days.
Lenders average your past two years. A drop hurts your qualifying income on 1099 loans. Bank statements only look at recent months, which might work better if your cash flow stayed strong.
Yes, but it restarts underwriting. I usually run both scenarios upfront. That way we pick the strongest option before submitting anything to a lender.