Loading
in Folsom, CA
Self-employed professionals in Folsom face unique challenges when seeking mortgage financing. Traditional lenders often struggle to verify income for independent contractors, freelancers, and business owners who don't receive W-2s.
Both 1099 Loans and Bank Statement Loans offer solutions for Folsom's growing self-employed population. Each program uses different methods to document your income and qualifies you based on your actual earning power rather than tax returns alone.
Understanding the key differences between these non-QM options helps you choose the right path for your Folsom home purchase or refinance. The best choice depends on how you receive income and what documentation you can provide.
1099 Loans use your 1099 forms from clients to verify income. This program works well for independent contractors and consultants who receive most of their earnings as 1099 income from multiple sources.
Lenders typically review 12 to 24 months of 1099 statements to calculate your qualifying income. This approach provides a clear picture of your earnings without requiring full tax returns or extensive business documentation.
The 1099 program often appeals to borrowers who take significant business deductions on tax returns. Your gross 1099 income is used for qualification, which may result in higher approval amounts than traditional mortgages based on net taxable income.
Bank Statement Loans analyze deposits in your business or personal bank accounts over 12 to 24 months. This program serves self-employed borrowers whose income flows through bank accounts rather than appearing on 1099s.
Lenders calculate your qualifying income by averaging monthly deposits and applying an expense ratio. Business owners, sole proprietors, and freelancers who receive payments via check, ACH, or wire transfers often benefit from this approach.
This option works particularly well if you operate as an LLC, S-Corp, or sole proprietorship. Bank Statement Loans provide flexibility for borrowers with complex income streams that don't fit neatly into 1099 documentation.
The primary difference lies in income documentation. 1099 Loans require actual 1099 forms from clients, while Bank Statement Loans analyze deposit patterns. Your business structure often determines which program fits better.
Independent contractors who receive 1099s typically find the 1099 Loan process more straightforward. Business owners who process payments through their company accounts usually prefer Bank Statement Loans since not all income generates a 1099.
Both programs accept lower credit scores than conventional loans and offer flexible debt-to-income ratios. Down payment requirements start around 10-20% for both options, though exact terms depend on your overall borrower profile and property type.
Choose a 1099 Loan if you work as an independent contractor receiving most income via 1099 forms. This works well for consultants, freelancers, and gig workers with multiple clients who issue 1099s at year-end.
Select a Bank Statement Loan if you own a business, operate as a sole proprietor, or receive income through methods that don't generate 1099s. This includes business owners who invoice clients, accept credit card payments, or run cash-based operations.
Some Folsom borrowers qualify under both programs. In these cases, SRK Capital can analyze both options to determine which provides better terms based on your specific income documentation and financial profile.
Typically, lenders require you to choose one documentation method. However, some programs allow supplemental documentation. Your mortgage broker can determine the best single approach for your situation.
Neither program requires full tax returns for income qualification. However, lenders may request tax transcripts to verify you're current on IRS obligations and to check for unreported liabilities.
Rates vary by borrower profile and market conditions. Both programs typically have similar rate ranges. Your actual rate depends on credit score, down payment, and documentation quality.
Both programs generally take 30-45 days to close. The timeline depends on how quickly you provide documentation and how complex your income situation appears to underwriters.
Most non-QM lenders require minimum credit scores of 620-660. Higher scores unlock better rates and terms. Some programs accept scores as low as 600 with larger down payments.