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in Lomita, CA
Self-employed borrowers in Lomita face a choice between two main non-QM paths. Both work around traditional W-2 income verification, but they validate your earnings differently.
1099 loans prove income through tax forms your clients submit to the IRS. Bank statement loans ignore tax returns entirely and analyze deposits instead.
Your choice depends on how you structure business expenses and what income shows on paper. Most self-employed borrowers favor one approach over the other based on their tax strategy.
1099 loans use the 1099 forms filed by your clients to calculate qualifying income. Underwriters review 12-24 months of 1099s to establish consistent earnings patterns.
This program works best for contractors who don't write off heavy business expenses. The lender qualifies you on gross 1099 income, not your taxable income after deductions.
Rates typically start around 7-8% depending on credit and down payment. You need 620+ credit and at least 10-15% down for most programs.
Bank statement loans bypass tax returns completely. Underwriters analyze 12 or 24 months of business or personal bank statements to calculate average monthly deposits.
They apply a percentage factor to your deposits—typically 50-75% depending on the program. Higher factors mean more qualifying income from the same deposits.
This route makes sense when you write off significant expenses that reduce taxable income. The bank sees gross revenue flowing through your accounts, not what's left after deductions.
Expect rates around 7.5-9% based on your profile. Most programs require 640+ credit and 15-20% down, though some lenders go lower.
The documentation split is straightforward. 1099 loans need your 1099 forms plus basic business documentation. Bank statement loans require 12-24 months of statements from every account showing business deposits.
Income calculation changes everything. A contractor earning $150,000 in 1099s qualifies on that full amount. The same person with $150,000 in bank deposits might only qualify on $75,000-$112,500 after the percentage factor.
Pricing slightly favors 1099 loans. You'll typically see rates 0.25-0.50% lower compared to bank statement programs, though both are priced higher than conventional loans.
Credit and down payment requirements overlap heavily. Both programs accept 620-640 credit minimums and similar down payment thresholds, though individual lenders vary.
Choose 1099 loans if you take minimal business deductions and your tax returns show strong income. You'll qualify faster with less paperwork and better pricing.
Pick bank statement loans when you write off expenses aggressively and your taxable income looks weak. The bank sees revenue before deductions, which often means higher qualifying income.
Some Lomita self-employed borrowers qualify under both programs but get better numbers with one approach. Run scenarios with both methods before committing to either path.
A broker with access to both options can calculate your qualifying income each way and show you the difference. That comparison usually makes the right choice obvious.
No, you choose one documentation path. Some lenders let you switch approaches mid-application if the first method doesn't work, but you can't blend both.
1099 loans typically close 3-5 days faster because bank statement underwriting requires more account analysis. Both usually close in 30-45 days total.
Yes, but expect 20-25% down minimums for rentals. Some lenders limit bank statement loans to primary residences only, while most accept 1099s for any property type.
Underwriters average your income across 12-24 months. Seasonal fluctuation is fine as long as the annual total shows consistency year over year.
Most lenders prefer 24 months for stronger files. 12-month programs exist but often require higher credit scores and larger down payments.