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in Sierra Madre, CA
Self-employed borrowers in Sierra Madre have two solid paths to financing. Both skip W-2s, but they verify income differently.
Your business structure determines which works better. 1099 loans match contractors who invoice clients. Bank statement loans fit business owners with complex write-offs.
Both are non-QM products, meaning lenders set their own rules outside standard Fannie Mae guidelines. Rates vary by borrower profile and market conditions.
1099 loans use your income forms from clients to prove earnings. Lenders total your 1099s from the past 1-2 years and calculate qualifying income.
This works cleanly for consultants, freelancers, and contractors who get paid via 1099-NEC or 1099-MISC. Your income documentation is straightforward.
Most lenders want to see consistent or growing 1099 income. They'll average your earnings and apply standard debt-to-income ratios to determine loan size.
Credit requirements typically start at 620, though stronger scores unlock better rates. You'll need 10-20% down depending on the property and your profile.
Bank statement loans analyze deposits in your business or personal accounts. Lenders review 12-24 months of statements to calculate average monthly income.
This method works for business owners who take deductions that reduce taxable income but show strong cash flow. The underwriter sees your actual deposits, not just what you reported to the IRS.
You can use business accounts, personal accounts, or a combination. Lenders apply expense ratios (typically 25-50%) to account for business costs, then qualify you on the net amount.
Most programs require 640+ credit and 10-20% down. The longer statement history you provide, the clearer your income picture becomes.
Income calculation is the main split. 1099 loans add up your invoiced earnings. Bank statement loans track deposits and subtract estimated expenses.
If you're a contractor who gets clean 1099s with minimal expenses, that's your simplest path. If you run a business with significant write-offs that lower your tax returns, bank statements show the real cash flow.
Documentation differs too. 1099 loans need those forms plus tax returns. Bank statement loans require every page of 12-24 months of statements, which means more paperwork upfront.
Rates and terms are similar since both are non-QM products. Your credit score, down payment, and debt ratios matter more than which income method you choose.
Choose 1099 loans if you're a straightforward freelancer or contractor. Your clients send you 1099s, you have minimal business expenses, and your income is easy to document.
Go with bank statement loans if you're a business owner with solid revenue but heavy deductions. Your tax returns look lean, but your bank accounts tell a different story.
Sierra Madre's housing stock skews toward single-family homes where either loan type works. The choice comes down to which income documentation tells your strongest financial story.
We run both scenarios when evaluating self-employed borrowers. Sometimes one qualifies you for more house. Sometimes they're neck-and-neck and we pick based on which closes faster.
Generally no. Lenders choose one income verification method per loan. We pick whichever qualifies you for the most house based on your specific numbers.
Rates are nearly identical since both are non-QM loans. Your credit score and down payment affect pricing more than the income documentation method you use.
Most lenders want 12-24 months of consistent self-employment income. One year might work with strong credit and larger down payment, but two years is standard.
Lenders typically average your income across the documentation period. Declining income raises red flags. Stable or growing income strengthens your application.
Yes. Personal account statements work if they show your business deposits. Lenders just need to see consistent income flowing through the accounts you provide.