Not Sure Which Program Fits Your Situation?
A Non-QM specialist reviews your income type and recommends the right path
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
Side-by-Side Comparison
| Feature | Option A | Option B |
|---|---|---|
| Income proof | Bank deposits (12â24 months) | IRS Form 1099 (1â2 years) |
| Tax returns required | No | No |
| Expense factor | 50% or CPA-certified | Fixed 10% |
| Best for | High-deduction business owners | Independent contractors with clean 1099s |
| Qualifying income method | Deposits à (1 â expense ratio) | 1099 income à 90% |
| Minimum credit score | 640 | 640 |
| Max LTV | 85% | 85% |
| Loan amounts | Up to $4,000,000 | Up to $4,000,000 |
The Core Distinction
The difference comes down to documentation and expense factor.
Bank statement loans calculate income from what actually deposits into your account â and then reduce it by an expense ratio (50% standard, or a lower CPA-certified ratio). This produces higher qualifying income for borrowers who have high gross revenue but also legitimate business expenses.
1099 loans calculate income from your 1099 forms â the amount a client reported paying you â and apply a fixed 10% expense factor. This produces a qualifying income of 90% of 1099 gross income.
Example: A consultant receives $300,000 in 1099 income. They run $60,000 in legitimate business expenses.
– 1099 loan qualifying income: $300,000 Ã 90% = $270,000
– Bank statement income (deposits after 20% CPA-certified expenses): $300,000 Ã 80% = $240,000
– 1099 loan wins here
But: A restaurant owner generates $1,200,000 in gross revenue and receives no 1099s. Income deposits to business account.
– No 1099 loan available (no 1099s issued)
– Bank statement income (50% expense ratio): $600,000 qualifying income
– Bank statement is the only option
When 1099 Income Is the Better Qualification
If your income is paid by clients who issue 1099s, and your actual expenses are higher than 10% of gross income, the 1099 program’s 10% fixed expense factor is more favorable than the bank statement 50% fixed ratio.
At $300,000 of 1099 income with $60,000 actual expenses (20% actual ratio):
– 1099 loan: $270,000 qualifying (90% of $300,000)
– Bank statement with 50%: $150,000 qualifying
– Bank statement with CPA at 20%: $240,000 qualifying
– 1099 loan is strongest here
When Bank Statements Are Better
If your income is cash, credit card, or transfer-based (not 1099-issued), bank statements are the only path. And if your actual business expenses are well below 50%, a CPA expense letter can make bank statements competitive with or superior to 1099 income.
Frequently Asked Questions
Which program is better for a self-employed borrower?
It depends entirely on how income is documented. Bank statement loans are designed for self-employed borrowers whose tax returns understate actual cash flow. The comparison product may be better or worse depending on your specific income documentation profile.
Does Mbanc offer both programs?
Yes. Mbanc offers bank statement loans, DSCR loans, 1099 loans, and asset utilization loans. A single loan officer can assess which program fits your situation best.
Can I combine both methods?
In some scenarios, income from multiple sources or documentation types can be blended. Discuss with your loan officer whether a combination approach is possible for your file.
What if I qualify for both options?
If both programs produce similar qualifying income, the choice is usually based on rate, LTV, documentation complexity, and overall loan cost. Your loan officer will run the full comparison.
Go Deeper
About the Author
Mayer Dallal is the Managing Director of Mbanc (Mortgage Bank of California, NMLS #38232), a consumer-direct Non-QM lender specializing in bank statement loans, DSCR loans, and asset utilization programs for self-employed borrowers and real estate investors. Mbanc is licensed in 22 states for primary residence lending plus an additional 24 states and Washington DC for non-owner-occupied investment property financing under the business-purpose exemption.
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Mbanc NMLS #38232 | Equal Housing Opportunity Lender
| Mortgage Bank of California
