The Quick Read: You qualify by giving the lender 12 months of bank statements, and the lender turns your deposits into income instead of relying on tax returns. A 1099 earner can use this path when the deposits are steady, the equity is there, and credit and reserves hold up, subject to lender guidelines. The loan is reviewed on documented income under the applicable program, so the file is documented, not undocumented.
- Documentation is 12 months of personal or business statements, with income set by deposit averaging and a lender-specific expense factor.
- On a primary residence, cash-out typically tops out around 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio.
- A second home cash-out typically runs up to 75% LTV. An investment property cash-out tops out around 75% LTV.
- Loan sizes run roughly $125,000 to $3,500,000, and reserves commonly run around 6 months of the housing payment.
Most 1099 earners hit the same wall. Write-offs shrink taxable income, so a conventional file shows far less than the borrower actually earns. Bank statement lending reads the deposits instead. This article walks through how that works, how a file gets built, and where it breaks.
What Is a Bank Statement Cash-Out Refinance for a 1099 Earner?
It is a new, larger mortgage that pays off your current one and hands you the difference in cash. The difference is that income comes from your deposits, not your returns. These are non-QM loans, which means they sit outside the standard conventional box. Across the wholesale network, the lenders that write them each publish their own program sheet, and the details differ from one sheet to the next.
“1099” shows up in two different ways, and the distinction matters:
- Bank statement path: the lender reads 12 months of deposits and applies an expense factor.
- 1099-only path: a separate documentation option where the lender relies on 1099 forms from the last one to two years instead of statements. Availability varies by program.
A 1099 borrower can often take either one. The better one depends on how much business expense sits behind your deposits.
Which Income Documentation Path Fits a 1099 Borrower?
The path that fits is the one that produces the stronger qualifying income, and that depends on your expense load. Heavy expenses behind your deposits make a statement-based number shrink. A low-expense practice can come out well on either route.
| Path | What you provide | Who it tends to fit | Main catch |
|---|---|---|---|
| Bank statements | 12 months, personal or business | Steady deposits, mixed payers | Expense factor reduces income |
| 1099-only | 1099 forms, one to two years | Clean 1099 history, few payers | Program availability varies |
| Asset depletion | Liquid asset statements | Large liquid balances, lumpy income | Primary residence only, up to 80% LTV |
Asset depletion is a third option when your liquid assets are large and your deposits are uneven. It qualifies from the assets themselves, and on a primary residence it runs up to about 80% LTV. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
How Does Underwriting Turn Deposits Into Income?
Underwriting scrubs the deposits, averages what survives, and applies an expense factor. The result is your qualifying income. Strong deposits alone do not carry a file. Credit, reserves, and leverage still get tested.
Here is the sequence the file goes through:
1. Collect every page. All pages of each statement, with every transaction visible. Missing pages are the most common avoidable delay on these files.
2. Scrub the deposits. Transfers between your own accounts, refunds, loan proceeds, and one-off non-income items are generally removed.
3. Average what is left. The eligible deposits are averaged across the review window.
4. Apply the expense factor. Business deposits are reduced by a lender-specific factor. Where a program allows it, an accountant-prepared expense statement can replace the fixed factor.
5. Test the file. Qualifying income is compared to your debts, and the lender reviews credit, reserves, LTV, and the property.
No lender in the network shares one universal expense factor. Treat any single number you see online as that one lender’s rule, not a standard.
One more note on the factor. A fixed ratio is simple but blunt. An accountant-prepared ratio can reflect your real costs, which helps when your actual expenses are low. The tradeoff on a primary residence cash-out is a lower leverage ceiling, 75% instead of 80%.
Which Deposits Count and Which Get Thrown Out?
Recurring payments from clients and platforms for work you performed count. Money that moved around or came from somewhere other than your work does not. Underwriters generally pull the second group out before averaging.
| Usually counted | Usually removed or questioned |
|---|---|
| Client payments for services | Transfers between your own accounts |
| Platform payouts tied to work | Refunds and reversals |
| Regular business receipts | Loan proceeds |
| Consistent recurring deposits | Gifts and one-off windfalls |
Platform payouts and several payers are fine when you can show where they come from. Large single deposits are the ones that draw questions. Keep invoices or 1099 forms that tie deposits to a payer.
What Leverage Applies to a Cash-Out Versus a Purchase?
Cash-out leverage is lower than purchase leverage, and it depends on occupancy. Do not carry a purchase number into a cash-out file.
| Occupancy and transaction | Typical ceiling |
|---|---|
| Primary residence cash-out, fixed expense ratio | Up to 80% LTV |
| Primary residence cash-out, accountant-prepared ratio | Up to 75% LTV |
| Second home cash-out | Up to 75% LTV |
| Investment property cash-out | Around 75% LTV |
| Primary residence purchase or rate-term | Up to 90% LTV on select programs |
The last row is a purchase and rate-term figure. It does not apply to cash-out. Stronger files earn the top of any range. Weaker credit or larger loan sizes pull the ceiling down, and every figure is subject to lender guidelines.
Two limits operate at once on a cash-out. One is income, because your qualifying income has to support the new payment. The other is equity, because the LTV ceiling caps the loan. Plenty of equity does not lift an income cap. Either limit can be the one that binds.
How Does Occupancy Change the Application?
Occupancy decides which rules and which path apply. Owner-occupied files are consumer mortgages. That covers a primary residence and a second home, and the standard consumer disclosure process applies.
A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from that consumer disclosure regime. Confirm which one applies to your property before you start, because the paperwork and the leverage both follow from it. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Bank statement paper on rentals has a stacking problem. Each financed property adds a payment to the same income base, so your debt-to-income gets tighter with each one. Lenders may also cap property counts. If you own several rentals, a DSCR cash-out is often the cleaner route, because it tests the property’s rent against its payment and does not analyze your personal income. It still has to clear the program’s coverage floor. Select lenders in the network offer programs below 1.00 coverage, with LTV and terms adjusted. The complete DSCR loans guide covers that side in full.
How Do You Apply, Step by Step?
You prepare the file, run the scenario, and then work the underwriting conditions. Clean preparation before the application does the most work.
1. Decide the path. Compare the bank statement route, the 1099-only route, and asset depletion for your expense load.
2. Clean up the accounts. Separate personal and business money where you can. Commingled accounts make the scrub harder.
3. Pull 12 months of statements. Every page, every account you want counted.
4. Label large deposits. Add a short note and backup for anything that is not routine revenue.
5. Gather the supporting papers. See the checklist below.
6. Review the scenario with a broker. The broker matches your deposits, property, credit, and leverage to a program in the wholesale network.
7. Order the appraisal and title. The property gets valued and title is cleared.
8. Work the conditions. Underwriting asks for clarifications on deposits, reserves, and anything unusual.
9. Sign and fund. The new loan pays off the old one and releases the cash difference.
What Documents Does the File Need?
| Document | Why the lender wants it | 1099 tip |
|---|---|---|
| 12 months of bank statements | Source of qualifying income | Include every page and account |
| 1099 forms | Ties deposits to payers | Needed if using the 1099 path |
| Proof of self-employment history | Shows income continuity | Business license or CPA letter |
| Current mortgage statement | Payoff and balance | Most recent month |
| Homeowners insurance | Property coverage | Current declarations page |
| ID | Identity check | Not expired |
| Appraisal | Value for LTV | Ordered through the lender |
| Reserves statements | Cash after closing | Around 6 months of the housing payment |
Reserves deserve their own attention. A file with strong deposits and thin reserves still stalls.
Where Does the General Rule Break?
The standard path breaks in a handful of predictable places. Each one has a fix.
- Short history. Under two years of 1099 or self-employment work draws more scrutiny. Some programs accept about one year if you worked in the same line before. Confirm against the specific program sheet.
- Declining or seasonal deposits. A 12-month window can look different from a 24-month window. Falling deposits are treated as a risk, and the lender may average conservatively.
- Commingled accounts. Mixed personal and business spending makes the scrub slower and the income lower.
- Large unexplained deposits. Anything not tied to a payer gets questioned or excluded.
- A low income number. If the expense factor cuts income too far, options include the accountant-prepared ratio, a different account set, a co-borrower, a lower loan amount, or a different program.
- Multiple financed properties. Debt-to-income tightens with each new loan on statement paper, as covered above.
Forward-looking caution: some programs are used as a bridge until tax returns support conventional financing. If that is your plan, ask about prepayment terms before you commit, because they can matter if you refinance again soon.
Does a Non-QM Loan Still Require Verification?
Yes. Non-QM does not mean no verification. Bank statement files still document the income they rely on. The CFPB’s ability-to-repay rule says creditors must make a reasonable, good-faith determination that the consumer can repay, and it does not prescribe comprehensive underwriting standards. That flexibility is why deposit-based methods exist. The regulation text requires verification using reliable third-party records, and a bank statement is a financial-institution record. The rule applies to consumer credit secured by a dwelling, which is why owner-occupied files get this treatment and business-purpose rentals sit on a different track.
How Do the Alternatives Compare?
| Option | Income test | Fits when |
|---|---|---|
| Bank statement cash-out | Your deposits | Strong deposits, heavy write-offs |
| DSCR cash-out | Property rent vs. its payment | Investment property, many rentals |
| Conventional cash-out | Tax returns, W-2s | Returns show full income |
| HELOC | Varies by lender | You keep a low first-lien payment |
The choice comes down to whether your personal cash flow or the property’s cash flow is the stronger story. A broker that shops several wholesale lenders can run both and see which produces the better file. The best program for your situation depends on property type, credit profile, leverage need, and documentation.
Key Terms Defined
Cash-out refinance: a new mortgage larger than the old one, with the difference paid to you in cash.
Bank statement loan: a non-QM loan that is reviewed around documented income from deposits, subject to lender guidelines.
Expense factor: the percentage lenders subtract from business deposits to estimate what you actually keep.
1099 income: payments to you as an independent contractor, reported on 1099 forms rather than a W-2.
Reserves: liquid funds you hold after closing, commonly around 6 months of the housing payment.
Seasoning: how long you must have owned the property before a lender allows cash-out, set by each program.
Frequently Asked Questions
Can I get a bank statement cash-out refinance with only 1099 income?
Yes, when your deposits are consistent and you meet credit, equity, and reserve requirements, subject to lender guidelines. You can often use 12 months of statements or, on programs that offer it, your 1099 forms. Which path produces more income depends on your expense load.
How much cash can I take out?
It depends on occupancy and your qualifying income. A primary residence typically runs up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. A second home runs up to 75% LTV, and an investment property around 75% LTV. Your income also has to support the new loan.
Do I need a CPA letter?
Not always. Some programs use a fixed expense ratio and need no CPA involvement. Others allow an accountant-prepared ratio, which may help when your real expenses are low, at a lower leverage ceiling on a primary residence. Many files also use a letter to show self-employment history.
What if my deposits dropped this year?
Expect closer review. A declining trend is treated as a risk, and the lender may average conservatively or look at a different window. Explaining the cause, such as a lost client, with documents helps.
Is a DSCR loan better if the property is a rental?
Often, for an investment property. A DSCR cash-out tests the rent against the payment and does not analyze your personal income. It still has to clear the program’s coverage floor, and select lenders offer programs below 1.00 coverage with adjusted LTV and terms.
If you are self-employed and want to see how the numbers work, Lendmire can help you compare bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals. Lendmire is a mortgage broker that arranges financing through select lenders in its wholesale network, and consumer mortgage availability covers 16 states.
This article is general information, not legal or tax advice. Consult a qualified professional, such as an attorney or CPA, about your own situation. Tax treatment varies; consult a qualified professional.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB Regulation Z § 1026.43
This article is part of Lendmire’s self-employed mortgage guides — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get Approved for a Bank Statement Cash-Out Refinance When the Appraisal Is Low? · Does a Bank Statement Cash-Out Refinance Make Sense to Invest in the Stock Market? · How Lenders Underwrite a Bank Statement Cash-Out Refinance With a 50% Expense Ratio
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.