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in National City, CA
National City's thriving self-employed community faces a choice between two income verification methods. Both loans work for non-W-2 earners, but they approach documentation differently.
Your business structure and how you manage expenses determines which loan gets you approved faster. Most brokers see clear patterns in who qualifies best for each option.
1099 loans use your tax returns to verify income, just like traditional mortgages. Lenders calculate your qualifying income from 1099 forms and personal tax returns, typically averaging two years.
This works best if you write off minimal expenses and show strong net income. Contractors who keep simple books and high profit margins qualify easily with this approach.
Rates often beat bank statement loans because lenders see verified tax filings as lower risk. You'll need 620+ credit and 10-20% down depending on your income documentation strength.
Bank statement loans skip tax returns entirely and use deposits to calculate income. Lenders review 12 or 24 months of business or personal bank statements, applying expense ratios between 0% and 50%.
This option rescues borrowers who write off heavy expenses for tax benefits. Your deposits show real cash flow even when tax returns show minimal net income.
You'll pay 0.5% to 1.5% higher rates than 1099 loans because underwriting relies on bank data instead of IRS filings. Expect 10-20% down and 640+ credit for most programs.
The core split is tax strategy. 1099 loans reward showing income to the IRS, while bank statement loans work around aggressive write-offs that minimize taxable income.
Rate difference typically runs 0.5% to 1% in favor of 1099 loans. A National City buyer at $600,000 pays roughly $200-350 more monthly with bank statements versus 1099 documentation.
Processing speed varies too. 1099 loans close like traditional mortgages since tax transcripts come straight from the IRS. Bank statement loans take longer as underwriters manually review every deposit.
Choose 1099 loans if your tax returns show 60%+ of gross receipts as net income. Contractors billing $150,000 with $90,000 net qualify easily and get better rates.
Pick bank statement loans if you write off 50%+ in legitimate business expenses. Your CPA saved you taxes, but now those write-offs block traditional qualification—bank deposits solve this.
Some borrowers qualify under both methods. Run the numbers both ways before choosing, because the rate difference adds up over 30 years even if both options approve you.
Yes, if you file taxes showing stronger net income. Most borrowers refinance once their tax strategy changes or business matures.
Both allow non-owner occupied purchases with higher down payments. Expect 20-25% down for investment deals regardless of income documentation type.
1099 loans typically close in 21-30 days. Bank statement loans add 5-10 days for manual deposit review and income calculation.
No, lenders pick one income calculation method per loan. You can't blend 1099 verification with bank statement analysis on the same application.
1099 loans start at 620 credit. Bank statement programs typically require 640 minimum, though some lenders go to 620 with larger down payments.