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in Encinitas, CA
Both loan types serve self-employed borrowers in Encinitas, but they verify income differently. Your business structure and how you document earnings determines which works better.
1099 loans use tax forms filed by clients who paid you. Bank statement loans analyze deposits across 12-24 months of personal or business accounts.
Most self-employed borrowers qualify for one but not both. The right choice depends on whether your 1099s reflect your actual income or if you write off most earnings.
1099 loans use income reported on tax forms from clients who paid you as an independent contractor. Lenders verify these through your tax returns and the actual 1099 documents.
This works well if you don't write off significant expenses. Underwriters calculate qualifying income from your 1099 totals minus a standard percentage for business costs.
You need consistent 1099 income from multiple sources over two years. Single-client dependency raises red flags about employment stability.
Bank statement loans analyze actual deposits in your accounts over 12 or 24 months. Underwriters calculate average monthly income from business deposits and personal transfers.
This option works for borrowers who write off most income through deductions. Your bank statements show real cash flow that tax returns don't reflect.
Lenders apply expense ratios between 25% and 50% depending on your industry. A service business gets lower expenses than product-based companies with inventory costs.
Documentation requirements differ completely. 1099 loans need tax returns, filed 1099 forms, and possibly business licenses. Bank statement loans skip tax returns entirely in favor of deposit analysis.
Income calculation methods aren't remotely similar. 1099 loans use reported taxable income. Bank statements calculate from gross deposits with standardized expense deductions.
Bank statement loans typically cost 0.5% to 1% more in rate. The tradeoff is qualifying with income your tax returns hide through write-offs.
Choose 1099 loans if your tax returns show 80% or more of your actual earnings. This happens when you run a service business with minimal deductible expenses.
Bank statement loans fit when you write off 40% or more through business deductions. Most product-based businesses and contractors with significant material costs fall here.
Your CPA can tell you which makes sense in 30 seconds. Compare your gross receipts to net taxable income on Schedule C. Large gaps mean bank statements work better.
No. Lenders structure these as separate programs with different underwriting. You choose one income verification method per application.
Not always. Both programs offer 10-20% down options. Your credit score and property type matter more than documentation method.
Two years minimum. They verify consistent contractor work and calculate average income across that period.
Seasonal businesses still qualify. Underwriters average across 12-24 months to smooth out fluctuations in Encinitas market cycles.
Yes, but it restarts underwriting. We recommend choosing the right program upfront based on your tax strategy.