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in Auburn, CA
Auburn's self-employed borrowers have two strong options for mortgage approval without W-2s. Both 1099 loans and bank statement loans skip traditional income verification, but they look at different paperwork to prove you can afford the payment.
Your business structure determines which path works better. Contractors with clean 1099s may qualify faster, while business owners who write off heavy expenses often get higher approval amounts with bank statements.
1099 loans use your 1099 forms from the past two years to calculate qualifying income. Lenders average your gross 1099 earnings, then apply standard expense ratios based on your industry to estimate net income.
This works great if you receive most income as 1099 contractor payments. You'll need two years of tax returns plus your actual 1099 forms. Approval times run faster than bank statement loans since the math is straightforward.
Bank statement loans analyze deposits in your personal or business accounts over 12 to 24 months. Lenders calculate average monthly deposits, then subtract a percentage for expenses—typically 25% to 50% depending on your business type.
This option reveals your actual cash flow before tax write-offs. If you depreciate equipment or deduct major expenses that lower your taxable income, bank statements show the real money moving through your business.
The biggest split is how each treats business expenses. 1099 loans use generic industry expense ratios regardless of your actual deductions. Bank statement loans see gross deposits, so your CPA's aggressive write-offs don't hurt qualifying income.
Documentation differs significantly. 1099 loans need tax returns plus the actual 1099 forms from clients. Bank statement loans skip tax returns entirely—you just provide 12 or 24 months of statements from one or two accounts.
Choose 1099 loans if most income arrives as contractor payments and your tax returns show decent net profit. These close faster and typically cost less than bank statement loans. You'll need organized 1099 forms from all clients.
Go with bank statements if you write off significant expenses, own rental properties alongside your business, or report minimal taxable income. You'll qualify for more house using gross deposits. Expect slightly higher rates since underwriting relies less on IRS verification.
You pick one path per loan application. Lenders don't combine both methods, but they'll help you test which approach gives higher qualifying income before starting underwriting.
Most lenders want 15-20% down for either program. Strong credit over 700 sometimes gets you to 10% down, but those deals are rare with non-QM loans.
Bank statement loans typically run 0.25% to 0.75% higher than 1099 loans. Rates vary by borrower profile and market conditions, but expect to pay more for the flexibility bank statements provide.
Lenders average two years, so one down year hurts but doesn't kill the deal. If the drop is steep, bank statements showing consistent deposits may qualify you for more.
Either works, and many borrowers use both. Business accounts show cleaner income flow, while personal accounts work fine if that's where you deposit client payments.