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in Chico, CA
Self-employed borrowers in Chico face unique challenges when applying for mortgages. Traditional lenders often struggle to qualify contractors and business owners who lack W-2 income.
Both 1099 loans and bank statement loans offer paths to homeownership for Chico's growing community of freelancers and entrepreneurs. Understanding how these non-QM options differ helps you choose the right financing strategy.
Your income documentation determines which option works best. The way you receive and manage your income makes one clearly better than the other for your situation.
1099 loans use your IRS 1099 forms to verify income, making them ideal for contractors who receive formal 1099-MISC or 1099-NEC statements. Lenders typically review one to two years of 1099 documentation to establish your qualifying income.
This option works best when you receive consistent 1099 income from clients or platforms. Your tax returns may also be reviewed, but the 1099 forms serve as primary income verification.
Rates vary by borrower profile and market conditions. Approval depends on your documented 1099 income, credit score, and overall financial picture.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to calculate your qualifying income. Lenders examine deposits to determine your average monthly income without relying on tax returns.
This approach benefits self-employed Chico borrowers who take business deductions that reduce taxable income. Your actual cash flow matters more than what appears on your tax returns.
Underwriters typically use a percentage of your deposits as qualifying income, excluding transfers and non-income deposits. Rates vary by borrower profile and market conditions.
The fundamental difference lies in documentation: 1099 loans require formal tax documents from clients, while bank statement loans analyze actual deposits. If you receive most income via 1099 forms, that program offers simpler verification.
Bank statement loans provide more flexibility for business owners who mix income sources or take significant write-offs. Your business structure and tax strategy heavily influence which option qualifies you for more.
Both programs typically require larger down payments than conventional loans. Credit score requirements and interest rates differ between lenders, but bank statement loans often carry slightly higher rates due to the additional underwriting complexity.
Choose 1099 loans if you receive most income through formal 1099 statements and your tax returns reflect your true earning power. Independent contractors, consultants, and gig workers with straightforward income streams benefit most from this approach.
Bank statement loans make sense when you run a business with significant deductions, mix multiple income sources, or show strong deposits that don't match your tax returns. Chico business owners who reinvest profits or write off expenses typically qualify for more using bank statements.
Consider meeting with a lender to review both options with your actual documentation. Your specific situation determines which program offers better terms and approval likelihood in Butte County's market.
Some lenders allow combining documentation types, but most programs use one primary method. Mixing approaches can complicate underwriting and may not improve your qualifying amount.
Rates vary by borrower profile and market conditions. Generally, 1099 loans may offer slightly better pricing due to simpler documentation, but your credit and down payment matter more than program type.
Most lenders require at least two years of self-employment in the same field. Some bank statement programs accept 12 months if you have strong financials and reserves.
Expect 10-20% down for most non-QM programs. Stronger credit and income documentation may qualify you for lower down payment requirements with certain lenders.
Yes, both programs work for investment properties, though expect higher rates and down payments. Lenders typically require 20-25% down for non-owner occupied purchases.