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in Taft, CA
Self-employed professionals in Taft face unique challenges when qualifying for a mortgage. Traditional lenders often struggle to verify income for independent contractors, business owners, and freelancers who don't receive W-2s.
Both 1099 loans and bank statement loans offer paths to homeownership for self-employed borrowers in Kern County. Each uses different documentation methods to verify your ability to repay, and understanding these differences helps you choose the right option.
The best choice depends on how you receive income and what documentation you can provide. Some borrowers qualify for both options, while others find one clearly fits their situation better.
1099 loans use your tax forms to verify income, specifically your 1099 forms that show payments received as an independent contractor. Lenders typically review one to two years of 1099s along with personal or business tax returns.
This option works well for contractors who receive most income through 1099 forms and maintain consistent tax reporting. Lenders calculate qualifying income based on your documented 1099 earnings, often averaging multiple years.
The application process resembles traditional mortgages more closely than other non-QM options. You'll provide tax documents that clearly show your contractor income, making verification relatively straightforward for lenders.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to calculate qualifying income. Lenders review your statements to identify consistent deposits and average your monthly income.
This option serves self-employed borrowers who may write off significant business expenses on tax returns, showing lower taxable income than actual cash flow. Bank statements reveal your true earnings before deductions.
The underwriting process focuses on deposit patterns rather than tax returns. Lenders typically use a percentage of total deposits, accounting for business expenses, to determine your qualifying income for the mortgage.
The primary difference lies in documentation: 1099 loans require tax forms showing contractor payments, while bank statement loans analyze deposit patterns. If you write off many business expenses, bank statements may show higher qualifying income than your tax returns reveal.
Income calculation methods differ significantly between these options. 1099 loans use reported taxable income from forms, while bank statement lenders apply a percentage to total deposits, typically 50% for business accounts or higher percentages for personal accounts.
Rates vary by borrower profile and market conditions, but both options generally carry slightly higher rates than conventional loans due to their non-QM status. The specific rate difference between them depends more on your overall financial profile than the loan type itself.
Choose 1099 loans if you receive most income through contractor payments and your tax returns accurately reflect your earning power. This works best when you don't write off excessive business expenses and your 1099s show stable, sufficient income.
Bank statement loans make more sense when business deductions significantly reduce your taxable income on returns. If your bank deposits show strong cash flow that tax forms don't capture, this option likely qualifies you for a larger loan amount.
Some Taft borrowers receive both 1099 income and other business revenue, making them candidates for either option. A mortgage broker can review your specific documentation and calculate which approach yields better qualifying income for your home purchase goals.
No, lenders use one income verification method per loan. You'll choose either 1099 documentation or bank statement analysis based on which shows stronger qualifying income for your situation.
Non-QM loans often require 10-20% down, though requirements vary by lender and your profile. Some programs accept lower down payments for qualified borrowers with strong financial profiles.
Processing typically takes 30-45 days, similar to conventional loans. The timeline depends on how quickly you provide documentation and how complex your income structure appears to underwriters.
Most lenders require minimum credit scores of 620-680 for non-QM loans. Higher scores generally qualify you for better rates and terms, regardless of which documentation method you use.
Yes, both 1099 and bank statement loans work for refinancing existing mortgages. The same documentation requirements apply whether you're purchasing a home or refinancing in Kern County.