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in Del Mar, CA
Self-employed professionals in Del Mar face a common challenge when applying for mortgages: traditional lenders don't accept their income documentation. Both 1099 loans and bank statement loans offer solutions for borrowers who can't provide standard W-2s and tax returns.
These non-QM options let you qualify using alternative income verification. The right choice depends on how you receive income and what documentation you can provide. Understanding the differences helps you choose the path with the best approval odds.
1099 loans verify income using your 1099 forms from clients and customers. Lenders typically review one to two years of 1099s to calculate your qualifying income. This option works well for contractors, consultants, and freelancers with consistent client relationships.
The approval process focuses on your gross 1099 income rather than the net income shown on tax returns. This can significantly increase your buying power if you take substantial business deductions. Rates vary by borrower profile and market conditions.
Bank statement loans analyze deposits in your personal or business accounts over 12 to 24 months. Lenders calculate your average monthly income by reviewing all deposits and applying an expense ratio. This approach captures income from multiple sources automatically.
These loans work for any self-employed borrower with regular bank deposits, regardless of how they receive payment. The lender typically uses 50% to 75% of your deposits as qualifying income, accounting for business expenses. This method benefits borrowers with diverse income streams.
The main difference lies in documentation requirements. 1099 loans need specific tax forms from each client, while bank statement loans simply require your monthly statements. If you work with multiple clients or receive payments through various channels, gathering all 1099s can be challenging.
Income calculation methods also differ significantly. 1099 loans use your reported gross income, while bank statement loans calculate income from deposit patterns. Bank statement programs may offer higher qualifying income if you have strong, consistent deposits that exceed your 1099 totals.
Both programs typically require credit scores of 620 or higher and down payments starting at 10% to 20%. Del Mar's competitive real estate market means having strong reserves and documentation improves your approval chances with either option.
Choose a 1099 loan if you receive most income through a few steady clients who provide annual tax forms. This option makes sense when your 1099 gross income clearly demonstrates your earning capacity. The simpler calculation can speed up approval if you have all forms ready.
Bank statement loans work better when you have multiple income sources, receive payments outside traditional 1099 arrangements, or can't obtain all necessary tax forms. This option also benefits borrowers whose bank deposits show higher income than their tax returns reflect.
Many Del Mar borrowers find bank statement programs more flexible since they don't rely on third-party documentation. Your mortgage broker can review your specific situation and recommend the option with the strongest approval potential and best terms.
You'll choose one program type per application. However, your lender may request bank statements as supporting documentation even on a 1099 loan to verify deposits match reported income.
Rates vary by borrower profile and market conditions. Both are non-QM products with similar pricing. Your credit score, down payment, and income strength impact your rate more than the program type.
Most lenders require one to two years of 1099s or 12 to 24 months of bank statements. Longer history strengthens your application and may improve terms.
Requirements vary by lender. Some programs require tax returns alongside 1099s or bank statements, while others don't. Your mortgage broker can identify programs matching your documentation.
Timeline depends on documentation readiness. Bank statement loans may close faster if you have statements organized. 1099 loans can be quicker if you have all forms from clients readily available.