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in Sonora, CA
Self-employed buyers in Sonora face a choice between two non-QM options that prove income differently. 1099 loans use tax documents, while bank statement loans skip the tax returns and pull income straight from deposits.
Both work for contractors, freelancers, and business owners who can't show W-2s. The right choice depends on how you file taxes and what your bank statements reveal about actual cash flow.
1099 loans rely on your tax forms to calculate qualifying income. Lenders look at your 1099-MISC or 1099-NEC forms from the past two years, then average that income to determine what you can afford.
This option works best if you claim most of your income and don't write off heavy business expenses. Credit score requirements typically start around 620, with 10-20% down depending on the lender.
Bank statement loans calculate income from 12 or 24 months of business or personal bank deposits. Lenders apply a percentage to your total deposits after accounting for business expenses, usually 50-75% depending on your industry.
This route makes sense if you write off significant expenses that shrink your taxable income. You'll need stronger credit, usually 640 minimum, and expect to put down 15-20% or more.
The core split comes down to tax strategy. If you report solid 1099 income and don't maximize deductions, that path offers simpler documentation and potentially better rates. If you legally minimize taxable income through write-offs, bank statements show your real earning power.
Bank statement loans accept messier financial pictures but cost more upfront. Rates run 0.5-1.5% higher than 1099 loans because lenders take on more risk interpreting deposit patterns instead of official tax documents.
Choose 1099 loans if your tax returns already show strong income. Sonora contractors with consistent 1099 earnings and minimal deductions should start here for lower rates and easier underwriting.
Pick bank statement loans if your CPA keeps your taxable income low. This applies to many Tuolumne County business owners who show $60K on taxes but actually deposit $120K annually. Those deposits become your qualifying income.
No. Lenders pick one income verification method per loan. You can't blend 1099 forms with bank statement deposits in the same application.
1099 loans close quicker because tax documents are standardized. Bank statement loans take longer as underwriters analyze every deposit pattern.
Yes. Most non-QM lenders want at least 24 months of self-employment history for either option to prove income stability.
Absolutely. Most self-employed borrowers start with conventional and move to 1099 or bank statement loans after denial. We see this constantly.
1099 loans beat bank statement rates by 0.5-1.5%. Rates vary by borrower profile and market conditions.