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in Citrus Heights, CA
Self-employed borrowers in Citrus Heights often struggle with traditional mortgage requirements that favor W-2 earners. Both 1099 loans and bank statement loans offer alternative paths to homeownership for independent contractors, freelancers, and business owners.
These non-QM mortgage options use different methods to verify your income, each with unique advantages depending on how you run your business. Understanding which documentation approach aligns with your financial situation helps you choose the right path to financing your Sacramento County home.
1099 loans verify income using your 1099 forms from clients and customers. This option works well for independent contractors, consultants, and gig workers who receive most income through 1099 reporting.
Lenders typically review one to two years of 1099 forms along with your tax returns. The process resembles traditional mortgage underwriting but accommodates variable income patterns common among contract workers.
This approach provides a straightforward verification method when your 1099 income accurately reflects your earning capacity. It's particularly useful for borrowers with minimal business expenses who don't need to add back deductions.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to calculate qualifying income. This method benefits self-employed borrowers who write off significant business expenses on tax returns.
Lenders review your deposit patterns and apply a percentage (typically 50-75%) to determine income. This approach often reveals higher qualifying income than tax returns show, especially for business owners with substantial deductions.
Bank statement loans offer flexibility for borrowers with complex income structures, seasonal revenue, or recent business growth. The documentation focuses on cash flow rather than taxable income.
The primary difference lies in documentation requirements and how lenders calculate your income. 1099 loans rely on official tax documents, while bank statement loans examine actual cash flow through your accounts.
1099 loans typically suit borrowers whose reported income closely matches their actual earnings. Bank statement loans better serve those who maximize tax deductions, reducing their taxable income below their actual cash flow.
Rates vary by borrower profile and market conditions, but bank statement loans may carry slightly higher rates due to the additional underwriting complexity. Down payment requirements for both options generally start at 10-20% for Citrus Heights purchases.
Choose 1099 loans if you receive most income through 1099 reporting, claim minimal business deductions, and have consistent year-over-year earnings. This option works well for consultants and contractors without complex business structures.
Bank statement loans make sense when you write off substantial expenses, operate a business with significant overhead, or need to demonstrate higher income than your tax returns show. This path benefits established business owners with strong cash flow.
Consider your tax strategy, income documentation availability, and long-term financial goals. A mortgage broker can review your specific situation and help you determine which option provides better terms for your Citrus Heights home purchase.
Most lenders require at least 12-24 months of income history for both loan types. Bank statement loans may accommodate newer businesses with strong deposit patterns, while 1099 loans typically need two years of consistent 1099 income.
Rates vary by borrower profile and market conditions. 1099 loans may offer slightly lower rates when your documentation is straightforward, while bank statement loans reflect the additional underwriting involved in analyzing deposit patterns.
Bank statement loans often require fewer tax returns than traditional mortgages. Some programs use bank statements exclusively, while others request one year of returns to verify business existence and filing compliance.
Some lenders offer hybrid approaches, but typically you'll choose one primary verification method. Your mortgage broker can determine which documentation approach maximizes your qualifying income for Citrus Heights properties.
Both loan types generally require 10-20% down for primary residences in Citrus Heights. Investment properties typically need 20-25% down. Your specific down payment depends on credit score, property type, and loan amount.