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in Moraga, CA
Self-employed professionals in Moraga face unique challenges when applying for a mortgage. Traditional lenders often struggle to qualify borrowers without W-2 income, even when you earn substantial income through your business.
Both 1099 loans and bank statement loans offer pathways to homeownership for independent contractors and business owners. Each approach uses different documentation to verify your ability to repay, making one option potentially better suited to your specific income structure.
Understanding how these two non-QM loan programs differ helps you choose the right financing for your Moraga home purchase or refinance.
1099 loans use your 1099 forms from the past one to two years to calculate qualifying income. Lenders review these tax documents to understand your contractor or freelance earnings, making this option ideal if you receive most income through 1099 reporting.
This program works well for consultants, freelance professionals, and independent contractors who maintain consistent 1099 income. The application process closely mirrors traditional mortgages, just with different income documentation.
Rates vary by borrower profile and market conditions. Your credit score, down payment, and income stability all influence the final terms you receive.
Bank statement loans analyze 12 to 24 months of personal or business bank statements to determine your income. Lenders calculate average monthly deposits, making this option valuable when your 1099 forms don't tell the complete financial story.
This approach benefits business owners who reinvest profits, have multiple income streams, or claim significant tax write-offs. The bank statements reveal actual cash flow rather than taxable income shown on returns.
Qualification focuses on deposit patterns and account activity. Consistent deposits demonstrate income stability even when tax returns show lower adjusted gross income.
The primary difference lies in documentation: 1099 loans require specific tax forms while bank statement loans need months of account activity. If you receive clear 1099 income without major deductions, the 1099 loan path typically offers simpler processing.
Bank statement loans shine when your tax returns don't reflect true earning power. Business owners who write off vehicle expenses, home office costs, or depreciation often show higher income through bank deposits than on tax forms.
Down payment requirements generally range from 10% to 20% for both programs, though bank statement loans may require slightly higher reserves. Your specific situation determines which program offers better terms.
Choose 1099 loans if you receive most income through contractor payments with minimal business deductions. This route works best when your 1099 forms accurately represent your earning capacity and you prefer straightforward tax document submission.
Bank statement loans fit better when you operate a business with significant expenses, take many tax deductions, or have income sources that don't appear on 1099 forms. This option also helps if you've recently started receiving 1099 income and lack two years of history.
Consider your documentation availability too. Gathering 24 months of bank statements takes more effort than submitting two years of 1099 forms. However, the extra work may result in higher qualifying income if your deposits exceed reported 1099 amounts.
Some lenders allow hybrid approaches, using both documentation types to maximize qualifying income. This flexibility helps when you have multiple income sources or want to present the strongest financial picture.
Rates vary by borrower profile and market conditions. 1099 loans sometimes carry slightly lower rates due to simpler underwriting, but your credit score and down payment have bigger impacts than loan type alone.
Most 1099 loans require one to two years of forms. Bank statement programs typically need 12 to 24 months of statements. Longer history demonstrates income stability and may improve your terms.
Yes, both 1099 and bank statement loans can finance investment properties. Expect higher down payment requirements and different debt-to-income calculations for non-owner-occupied purchases.
Bank statement loans often handle variable income better since they average deposits over 12-24 months. Seasonal fluctuations smooth out over the longer review period, showing your true earning capacity.