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in Grass Valley, CA
Self-employed borrowers in Grass Valley face a choice when conventional loans won't work. Both 1099 loans and bank statement loans solve the income documentation problem, but they pull from different financial records.
Your decision hinges on how you get paid and what your books look like. One option uses your 1099 forms to calculate qualifying income. The other ignores tax returns entirely and analyzes cash flow through your bank accounts.
1099 loans qualify you based on the gross income reported on your 1099 forms. Lenders typically average 12-24 months of 1099 income without the deep write-offs that hurt you on Schedule C.
This works well if you receive 1099s from consistent clients and your reported income is strong. You'll need decent credit, usually 620 minimum, and expect rates about 1-2% above conventional programs.
Bank statement loans calculate income by analyzing deposits in your business or personal accounts over 12-24 months. Lenders apply an expense factor, usually deducting 25-50% for business costs, then use the remainder as qualifying income.
This approach helps borrowers who write off aggressively or have variable income sources not reflected on 1099s. You need 12 months minimum of consistent deposits, credit scores around 620-640, and down payments starting at 10-15%.
The core split is documentation type. 1099 loans need clean 1099 forms showing consistent contractor income. Bank statement loans ignore your 1099s entirely and look only at deposit patterns.
Income calculation methods diverge sharply. 1099 programs use reported earnings directly. Bank statement lenders apply expense ratios that can hurt high-overhead businesses but help those with minimal documented expenses.
Down payment and rate differences exist but aren't massive. Bank statement loans often require slightly larger down payments and carry marginally higher rates due to the less standardized underwriting.
Choose 1099 loans if you're a contractor with strong reported income and regular clients issuing proper forms. This path offers cleaner underwriting when your 1099 income accurately reflects your earning power.
Pick bank statement loans when your tax returns don't tell the full story. S-corp owners, gig workers mixing cash and digital payments, and anyone writing off heavily will likely show stronger income through deposits than through 1099s.
Both programs serve Grass Valley's self-employed community, from tech contractors working remotely to local business owners. Your CPA's tax strategy often determines which loan type makes you look stronger financially.
Some lenders allow hybrid approaches, but most underwriters pick one income calculation method. Mixing documentation types usually complicates approval rather than strengthening your file.
Rates are typically similar, within 0.25-0.5% of each other. Your credit profile and down payment matter more than the income documentation type for rate pricing.
1099 loans rarely require CPA verification since the forms are standard IRS documents. Bank statement loans sometimes need a CPA letter explaining business structure or deposit sources.
Both programs typically require 12-24 months of documentation. Two years of consistent income strengthens your application and often improves rate pricing.
Lenders average the period or use the lower year, which hurts qualification. Bank statement loans may show better if your deposits stayed strong despite lower reported 1099 income.