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in Lancaster, CA
Lancaster's self-employed buyers face a choice between two non-QM paths. Both skip tax returns, but the income calculation differs sharply.
1099 loans look at contractor statements from clients. Bank statement loans analyze deposits over 12-24 months. Your paperwork determines which works best.
1099 loans qualify you based on contractor statements from your clients. Lenders total your 1099 forms, then apply an expense ratio to estimate your net income.
Most lenders use a 25-50% expense deduction depending on your industry. If you show $200K in 1099 income, they might qualify you on $100K-$150K after assumed expenses.
This works well if most income comes through documented 1099 relationships. You need 12-24 months of contractor history with the same clients for the strongest file.
Bank statement loans calculate income from deposit patterns in your personal or business accounts. Lenders review 12 or 24 months of statements to find your average monthly income.
They apply a 25-50% expense ratio to deposits, similar to 1099 loans. The difference: they see all money flowing through your accounts, not just documented contractor payments.
This option fits business owners with varied income sources. Cash deposits, client transfers, and business revenue all count toward qualifying income.
The core split: 1099 loans need formal contractor documentation while bank statements track actual cash flow. If you work with three major clients who issue 1099s, the first option is cleaner.
Bank statement loans capture income that doesn't generate 1099 forms. Small cash jobs, varied clients, or business structures that complicate contractor reporting all favor the bank statement route.
Rates vary by borrower profile and market conditions, but bank statement loans typically run slightly higher due to broader income acceptance. Expect 6.5-8.5% on either program currently.
Pick 1099 loans if you file Schedule C and work with established clients who send year-end forms. Your income documentation is already organized, and lenders see predictable contractor relationships.
Choose bank statements if income comes from multiple sources or you own a business with complicated reporting. Also smart if you write off heavy expenses that tank your tax return income.
Lancaster's aerospace and service industries create both scenarios. Contractors at Northrop or Boeing facilities often have clean 1099 trails. Local business owners juggling multiple revenue streams lean toward bank statements.
Some lenders allow hybrid approaches, using 1099s for one income source and bank statements for another. We'd structure it based on which documentation shows your strongest qualifying position.
1099 loans typically price 0.25-0.5% lower because the income documentation is more standardized. Both programs compete closely when your credit exceeds 700.
Yes. Most non-QM lenders want 24 months in your current self-employed role. Some accept 12 months if you stayed in the same industry after leaving W-2 work.
Lenders average the 12 or 24 months, so seasonal variation is fine. Just avoid recent months with unusually low deposits that could raise questions about business stability.
Either works. Business accounts often show cleaner income flow. Personal accounts work if you run income through them, but expect questions about non-income deposits like transfers or gifts.