| Program | How Income Is Calculated | Example Result |
|---|---|---|
| Business Bank Statements - 24 months | Total deposits ÷ 24 months × expense factor (typically 50%) Business expenses assumed at 50% unless CPA letter provided | $480K deposits → $10,000/mo qualifying |
| Personal Bank Statements - 12 or 24 months | Total deposits ÷ months (business expenses already removed) Fewer adjustments since funds arrive after business costs | $240K deposits → $20,000/mo qualifying |
| 1099 Income - 1–2 years | Total gross 1099 income ÷ months used No Schedule C deductions applied — gross earnings used directly | $180K 1099 → $15,000/mo qualifying |
| Tax Return (Schedule C) - Conventional | Net income after all deductions ÷ 24 months Write-offs significantly reduce this number for most business owners | $180K gross → $3,500/mo qualifying after deductions |
| Asset Utilization | Eligible assets ÷ loan factor (e.g., 84 months for 7-year term) Retirement accounts often discounted 30–40% before calculation | $1M portfolio → ~$11,900/mo qualifying |
| Feature | Conventional Loan | Non-QM / Bank Statement |
|---|---|---|
| Income Documentation | 2 years tax returns required | Bank statements, 1099s, or P&L | How Income Is Calculated | Net income after all deductions | Gross deposits or gross 1099 earnings | Impact of Write-Offs |
Significantly reduces qualifying income
|
Write-offs don't reduce qualifying income
|
Interest Rates | Lowest available rates | Slightly higher — but approval is the priority | Down Payment | As low as 5% | Typically 10–20% required | Self-Employment History | 2+ years required | 1–2 years (varies by program) | Best For | Self-employed with minimal write-offs and clean returns | Business owners whose returns understate true income |
Most conventional programs require 2 years of self-employment history. However, some non-QM lenders allow as little as 12 months if you have a prior work history in the same field and your income is well-documented. Scott can identify which lenders in his network have the most flexibility for shorter histories.
Yes — this is exactly the situation that bank statement loans and 1099 programs are designed for. Instead of using your adjusted gross income from your returns, the lender uses your actual deposits or gross contract earnings. Many business owners qualify for significantly higher amounts through these programs than conventional underwriting would allow.
Requirements vary by program and lender. Most non-QM programs look for a minimum of 620–640. Bank statement programs typically prefer 660+. Jumbo and higher loan amounts often require 700+. Strong income documentation can offset some credit challenges in certain programs.
Either can work — or a combination. Personal accounts are used more directly since business expenses have already been separated out. Business accounts have an expense factor applied (commonly 50%), which reduces the qualifying amount. If your personal account shows strong, consistent deposits, that's often the stronger document to use. Scott reviews both options before recommending which to submit.
Multiple income sources are common among the borrowers Scott works with. Each stream is reviewed separately and can often be combined to strengthen the overall qualifying income. The key is clean documentation and a clear paper trail between your business activity and deposits. Scott helps you organize this before submission.
Non-QM rates are typically 0.5–1.5% higher than conventional rates, depending on the program, LTV, credit score, and loan size. For many self-employed borrowers, the trade-off is worth it — they can qualify for a home they couldn't get approved for otherwise. As a broker, Scott shops multiple lenders to find the most competitive rate for your specific profile.
Yes. The same bank statement, 1099, and P&L programs are available for refinance transactions — including cash-out refinances. Many self-employed homeowners use cash-out refinancing to pull equity for business investment without requiring traditional income documentation.