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in Montague, CA
Montague's self-employed borrowers have two solid paths to financing when W-2 documentation isn't an option. Both 1099 loans and bank statement loans work around traditional income verification, but they approach documentation differently.
Your choice depends on how you receive income and what financial records you keep. One uses tax forms to calculate qualifying income. The other analyzes cash flow from your business accounts.
1099 loans verify income using your 1099-MISC or 1099-NEC forms from clients or companies that paid you. Lenders typically average 12 to 24 months of 1099 income to determine what you can borrow.
This works well if you receive consistent 1099s and your tax returns reflect steady income. The lender focuses on what you actually earned, not what you deposited after business expenses.
You'll need good documentation from each income source. Missing 1099s or gaps in earnings history complicate approval. Credit requirements usually start at 620, though better scores improve your rate.
Bank statement loans analyze deposits in your business or personal accounts over 12 or 24 months. The lender calculates income by reviewing cash flow patterns, not tax returns.
This option helps borrowers who write off significant expenses or run cash through their accounts that doesn't appear on 1099s. You can use business accounts, personal accounts, or both.
Lenders apply a percentage factor to total deposits to estimate actual income after business costs. Typical factors range from 50% to 100% depending on your business type and expense profile.
The core split is documentation style. 1099 loans need formal income reports from each client. Bank statement loans look at what actually hit your accounts, regardless of how it was reported.
Bank statement loans typically offer more flexibility for borrowers who minimize taxable income through deductions. 1099 loans work better when your forms accurately reflect what you can afford.
Rates vary by borrower profile and market conditions, but bank statement loans often price slightly higher due to the less standardized underwriting. Both require larger down payments than conventional loans, usually 10% to 20% minimum.
Choose 1099 loans if you receive regular payments documented on tax forms and your income is consistent year over year. This path makes sense for contractors who don't heavily expense their earnings.
Pick bank statement loans if you write off most of your income, receive cash payments, or run significant revenue through accounts that doesn't show up on 1099s. This works for established businesses with steady deposits.
In Montague's smaller market, having both options matters because properties move slowly. You want approval locked before you find the right home, not after.
Some lenders allow hybrid approaches, but most require you to pick one documentation method. Mixing them complicates underwriting and often doesn't improve your qualifying amount.
Either works. Personal accounts are fine if that's where your business income deposits. Many self-employed borrowers qualify using only personal checking statements.
Declining income makes qualification harder with 1099 loans since lenders average recent years. Bank statement loans might work better if your deposits stayed steady despite lower reported income.
1099 loans need all tax forms from the qualification period plus returns. Bank statement loans require 12 or 24 consecutive months of statements with no gaps.
Bank statement loans typically price 0.25% to 0.75% higher than 1099 loans. Rates vary by borrower profile and market conditions for both programs.