Choosing the Right Loan Type

How to decide between bank statement loans, 1099 loans, P&L loans, and asset depletion loans based on your situation

Each self-employed mortgage program uses a different method to calculate your qualifying income. The right choice depends on how your income is structured and which method produces the strongest qualification.

Quick Comparison

Loan Type	Income Source	Best For
Bank Statement	Bank deposits	Business owners with strong cash flow
1099	1099 forms	Independent contractors with consistent clients
P&L	CPA-prepared financials	Borrowers whose P&L shows higher income than deposits
Asset Depletion	Liquid assets	High-net-worth borrowers with limited income documentation

Bank Statement Loans

Use this if your income flows consistently through your bank accounts—either personal or business. The lender counts your deposits, removes ineligible items (transfers, refunds), and applies an expense factor if you’re using business statements.

Best fit: LLC owners, S-corp shareholders, sole proprietors, business owners who pay themselves through their accounts.

Not ideal if your business takes in a lot of cash that doesn’t get deposited, or if your deposits are highly irregular.

1099 Loans

Use this if you receive 1099 forms from clients or companies and your 1099 income is higher than what your tax return shows after deductions. Some lenders use 1099s directly; others use a combination of 1099s and bank statements.

Best fit: Real estate agents, insurance agents, commission salespeople, IT consultants, healthcare contractors.

Not ideal if your 1099 income varies widely year to year, or if you have significant unreported income.

P&L Loans

Use this if a CPA-prepared profit and loss statement reflects higher net income than your tax return or bank statement calculation. The lender relies on the P&L as the primary income document, sometimes combined with bank statements for verification.

Best fit: Borrowers with well-organized financials whose actual profit margin is higher than expense factors assigned by bank statement lenders would imply.

Not ideal if you don’t have a CPA or if your P&L would show lower income than other methods.

Asset Depletion Loans

Use this if you have substantial liquid assets but low or inconsistent documentable income. The lender divides your assets over a set period (often 360 months) to create a monthly qualifying income figure.

Best fit: Retirees, business owners who reinvest profits, high-net-worth borrowers with investment portfolios.

Not ideal if your assets fall below program minimums (typically $500,000 to$1,000,000+).

When Multiple Programs Apply

Some borrowers qualify under more than one approach. In that case, run the numbers on each and choose the program that yields the highest qualifying income or best overall terms. Some lenders also allow combining methods—for example, adding asset depletion income to bank statement income to reach a higher qualifying number.

When None of These Apply

If your income is primarily cash and doesn’t flow through bank accounts, if you’re newly self-employed with no track record, or if your credit and down payment are below program minimums, these loans may not be available. A co-borrower or a longer waiting period may be the most practical path forward.