Quick answer
A bank statement loan uses deposits with an expense factor, a P&L loan uses your actual reported profit, and a 1099 loan uses gross 1099 pay minus a small flat factor. Contractors paid by a few clients usually do best with 1099. Owners with strong margins and clean books often do best with a P&L. Owners with many revenue sources and heavy write-offs often do best with bank statements.
Side by side
| Bank statement | P&L | 1099 | |
|---|---|---|---|
| Income source | Deposits | Net profit on the P&L | Gross 1099 income |
| Expense treatment | Expense factor, often around 50% for business accounts | Your actual expenses | Flat factor, often around 10% |
| Documents | 12–24 months of statements | 12–24 month P&L, often plus 2–3 months of statements | 1–2 years of 1099s |
| Best fit | Many revenue sources, heavy write-offs | Clean books, healthy margins | Contractors with a few payers |
Typical ranges; factors and documents vary by lender.
One example, three ways
Take a consultant with $360,000 in yearly deposits, $150,000 in real business expenses, and $300,000 of that revenue paid on 1099s.
| Method | Math | Qualifying income (example) |
|---|---|---|
| Bank statement (50% factor) | $360,000 × 50% | $180,000/yr ($15,000/mo) |
| P&L | $360,000 − $150,000 | $210,000/yr ($17,500/mo) |
| 1099 (10% factor) | $300,000 × 90% | $270,000/yr ($22,500/mo) |
Same business, three different answers. Here the 1099 route shows the most income because most revenue comes on 1099s and the flat factor is small. A business with lots of cash or card sales and no 1099s would not have that option.
Example only, for education. Your lender's factors and adjustments set the final numbers.
How to pick
- Mostly paid on 1099s by a few clients? Start with a 1099 mortgage.
- Real expenses well below 50% of revenue, and a CPA who will sign a P&L? Price a P&L mortgage.
- Lots of revenue sources, cash or card sales, or messy books? A bank statement mortgage is usually simplest.
A good loan officer will run all three before choosing. That is exactly what I do on every self-employed file.
Already own? The equity versions
If you only need cash and like your current mortgage rate, each method has a home equity version: the bank statement HELOC, P&L HELOC and 1099 HELOC.
FAQ
Which is better, a bank statement or P&L loan?
It depends on your margins. A P&L uses your actual expenses, while a bank statement loan applies a standard expense factor to deposits. If your real expenses are lower than the factor, the P&L usually shows more income.
Can a 1099 contractor use a bank statement loan?
Yes. But if most of your income is paid on 1099s, a 1099 loan with a small flat expense factor often shows more qualifying income.
Can a lender use more than one method?
Usually you choose one documentation type per loan, but a loan officer can run all three to see which qualifies you best.
Part of the self-employed and non-QM mortgage guide: bank statement, P&L, 1099, asset depletion, DSCR, WVOE, ITIN and foreign national loans.
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