Non-QM
Bank Statement and 1099 Loans for the Self-Employed
Short answer
A bank statement loan lets a self-employed borrower document income with 12 or 24 months of bank deposits instead of tax returns. A 1099 loan uses 1099 forms for independent contractors. Both sit outside standard agency guidelines, so they usually ask for a larger down payment and more reserves, and they cost more than a conventional loan.
Chris Lamm, NMLS# 209221Published Last reviewed
How these loans count income
- Bank statements. Deposits are averaged over 12 or 24 months. For a business account, an expense factor is applied, since not every deposit is profit.
- 1099 forms. For independent contractors, income can be based on 1099s instead of full tax returns.
- Profit and loss statement. Some programs use a profit and loss statement prepared by a CPA or tax professional.
These are often called non-QM loans. The lender still reviews credit, savings, the property and proof that the business is real.
Who they tend to fit
Business owners, contractors, commission earners and gig workers whose tax returns show less income than they really earn, usually because of legitimate write-offs.
If your tax returns already support the payment, a conventional, FHA or VA loan is usually the better deal. We check that first. Veterans who are self-employed should also read the self-employed VA guide.
What to gather
- Twelve to 24 months of statements from the account your income lands in, every page
- Proof the business exists: a business license, state registration or a letter from your tax professional
- Your 1099s for the last two years, if you are a contractor
- A year-to-date profit and loss statement, if you have one
- Two months of statements for your savings and other assets
- A photo ID
Common snags
- Transfers that look like income. Money moved between your own accounts is not counted. Be ready to explain large or unusual deposits.
- Mixed personal and business activity. One account for everything makes the income harder to read. Separate accounts help.
- Falling deposits. A clear downward trend raises questions about where the business is heading.
- A short track record. Many programs look for about two years of self-employment or work in the same field.
- Cash needed. Expect a larger down payment and more money left in reserve than a conventional loan asks for.
Your next step
Bring a rough idea of what the business earns after expenses and which accounts the income lands in. A first call can sort out whether tax returns, bank statements or 1099s tell your story best.
When you want to talk it through, book a short phone call with Zak on Chris Lamm’s team at MortgageOne. No credit check is needed for a first call, and you can bring as many questions as you like.
General education, not a loan offer or a commitment to lend. To talk through your own situation, book a short phone call at reddinglender.com/schedule or call (530) 282-1166.
Private lender. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs or any government agency.
Common questions
Do bank statement loans use tax returns?
The income is calculated from bank deposits rather than tax returns. The lender still verifies that the business is real and reviews credit, assets and the property.
Are these loans more expensive?
Usually, yes. They sit outside standard guidelines, so the cost and the down payment are typically higher than a conventional loan. That is why we compare the standard options first.
How long do I need to be self-employed?
Many programs look for about two years of self-employment or work in the same field. Some will consider a shorter history when there is strong experience in the same line of work.
Written by Chris Lamm
Senior Loan Advisor and Branch Manager, MortgageOne Inc. NMLS# 209221. 25 years in mortgage lending.
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