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in Imperial Beach, CA
Imperial Beach self-employed buyers face a clear choice: prove income with 1099s or bank deposits. Both options work when you don't have W-2s, but they look at your earnings completely differently.
The right loan depends on how you receive payments and what expenses you write off. Most Imperial Beach contractors pick based on which method shows stronger qualifying income.
1099 loans qualify you based on your 1099 forms from the past two years. Lenders average your gross 1099 income and subtract typical industry expenses, usually 10-25% depending on your field.
This works best when you receive most income through 1099s with minimal business deductions. Imperial Beach contractors who keep tax write-offs low often show stronger income on 1099s than tax returns.
You'll need two years of 1099 history in the same field. Credit requirements start at 620, though most approvals happen above 660 with 15-20% down.
Bank statement loans calculate income from deposits in your business or personal accounts. Lenders review 12 or 24 months of statements and apply a 25-50% expense ratio to your average monthly deposits.
This option fits self-employed borrowers who mix payment types or write off significant expenses. If your 1099s don't capture all income streams, bank statements often tell the full story.
You need consistent deposits showing stable business activity. Most lenders require 640+ credit and 15-20% down, though rates vary by borrower profile and market conditions.
The core difference is what documentation drives your income calculation. 1099 loans rely on IRS forms showing payments received, while bank statement loans track actual deposits hitting your accounts.
Expense treatment separates these products. 1099 loans apply lower expense ratios (10-25%) since they're based on gross receipts. Bank statement loans assume higher expenses (25-50%) because deposits include all money flowing through your business.
Documentation complexity differs significantly. 1099 loans need clean forms from consistent clients over two years. Bank statements work even when income arrives through Venmo, Zelle, wire transfers, or cash deposits.
Choose 1099 loans if you receive most income through 1099 forms and claim minimal business deductions. This works for consultants, IT contractors, and creative professionals with low overhead who want the cleanest documentation path.
Pick bank statement loans when you mix payment methods, accept cash or digital payments, or write off substantial expenses. Imperial Beach service providers, construction trades, and retail business owners typically qualify stronger this way.
Run the numbers both ways before deciding. A broker can calculate your qualifying income under each method and show which produces the higher loan amount for your situation.
No, lenders pick one income calculation method per loan. You'll apply under either 1099 or bank statement guidelines, not both simultaneously.
Rates are similar since both are non-QM loans. Your credit score, down payment, and income stability matter more than which documentation type you use.
Most 1099 loan programs want returns to verify the 1099s filed. Bank statement loans often skip tax returns entirely, using only deposit history.
You need two full years of 1099 income in the same industry. Gaps or field changes can disqualify you from 1099 loan programs.
Lenders average deposits over 12-24 months, smoothing out fluctuations. Consistent overall volume matters more than perfect month-to-month uniformity.