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in Etna, CA
Etna's self-employed buyers—from ranch consultants to remote tech contractors—face a common problem: steady income that doesn't show up cleanly on tax returns. Both 1099 and bank statement loans solve this, but they verify income differently.
1099 loans use your income statements from clients. Bank statement loans analyze deposits over 12-24 months. The right choice depends on how you structure deductions and what your cash flow looks like.
1099 loans base approval on income statements you receive from clients. Lenders average your 1099 forms from the past one or two years. This works if you don't write off most of your income and your 1099 amounts are solid.
Most programs require two years of 1099 history in the same field. Credit minimums typically start at 620, though 680+ gets better pricing. Rates vary by borrower profile and market conditions, usually running 1-2 points above conventional.
Bank statement loans analyze 12-24 months of personal or business account deposits. Underwriters calculate average monthly income and apply an expense factor (typically 25-50%). This captures cash flow that tax returns miss after deductions.
These loans work well for borrowers who maximize write-offs. You need clean deposits without frequent transfers between accounts. Most lenders require 10-20% down and credit scores around 640, though 700+ opens more options.
The core split: 1099 loans look at what clients paid you before deductions. Bank statement loans track what actually hit your account. If you write off 40% of revenue, bank statements show higher qualifying income.
Documentation varies significantly. 1099 loans need those specific forms from every client—harder if you have 15 small clients versus three major ones. Bank statements require cleaner accounts without personal funds mixing with business cash constantly.
Choose 1099 loans if you report most income on tax returns and receive clear 1099 forms from a handful of steady clients. This path is simpler when your paperwork is straightforward and your taxable income supports the loan amount you need.
Go with bank statement loans if you write off significant expenses or have irregular 1099 documentation. Also better if you run cash through your accounts from multiple small clients or if two years of 1099s don't tell the full income story.
Most lenders pick one method per file. However, some programs let you supplement 1099 income with additional bank statement documentation if the 1099s alone fall short.
Neither has a built-in rate advantage—pricing depends on credit score, down payment, and loan amount. Rates vary by borrower profile and market conditions.
1099 loans need your personal tax returns to verify the 1099 income. Bank statement loans often skip tax returns entirely, making them faster for heavy deduction users.
Underwriters may question large one-time deposits. Regular, consistent income works best. Frequent transfers between personal accounts can also complicate approval.
1099 loans close in 21-30 days typically. Bank statement loans take 30-45 days since underwriters manually review months of transactions.