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in Solana Beach, CA
Self-employed buyers in Solana Beach have two strong financing options when traditional mortgages don't fit. Both 1099 loans and bank statement loans cater to non-traditional income, but they verify earnings differently.
Understanding which documentation method works better for your business structure can mean the difference between approval and denial. Your income type and recordkeeping habits determine which path makes the most sense.
Both options are non-QM loans designed specifically for California's thriving independent contractor and small business community. Let's compare how each program evaluates your ability to afford a Solana Beach home.
1099 loans use your IRS 1099 forms to verify income, making them ideal for independent contractors who receive these tax documents from clients. Lenders typically review one to two years of 1099s to calculate your qualifying income.
This option works well if you have multiple clients who issue 1099s and your business expenses are minimal. The lender can see your gross earnings clearly documented on official tax forms.
Because 1099s show income before deductions, you might qualify for a larger loan amount than with tax returns alone. However, you'll still need good credit and sufficient assets for down payment and reserves.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to calculate your income. Lenders review your statements to identify consistent revenue streams and average your monthly deposits.
This program suits business owners, freelancers, and contractors who don't receive traditional 1099s or whose expenses significantly reduce their tax returns. Your actual cash flow matters more than what you report to the IRS.
The flexibility to use personal or business accounts gives you options based on how you manage finances. Lenders typically apply a percentage (often 50-75%) of your deposits as qualifying income to account for business expenses.
The main difference is documentation: 1099 loans require tax forms from your clients, while bank statement loans need your account statements. If you receive formal 1099s, that route is usually simpler and may qualify you for more.
Bank statement loans offer more flexibility for business owners with significant write-offs or those paid through platforms that don't issue 1099s. They're also better if your income varies widely month to month.
Rates vary by borrower profile and market conditions, though both programs typically carry slightly higher rates than conventional loans due to their non-QM status. Down payment requirements usually start at 10-20% for either option.
Processing time can differ too. 1099 loans may close faster if your documentation is straightforward, while bank statement loans require more detailed income analysis by the underwriter.
Choose 1099 loans if you receive regular 1099 forms from clients and your business expenses are low to moderate. This path offers cleaner documentation and potentially higher qualifying income based on your gross earnings.
Pick bank statement loans if you run an established business with significant deductions, receive payments through non-1099 channels, or want to use your actual cash flow for qualification. This works especially well for Solana Beach business owners who've optimized their tax strategy.
Many self-employed borrowers actually qualify under both programs. A knowledgeable mortgage broker can run your numbers both ways to see which yields better loan terms for your Solana Beach purchase.
Your specific situation matters more than general rules. Consider working with a lender experienced in non-QM financing who understands California's self-employment landscape and can guide you to the right fit.
Generally you'll choose one program or the other, but some lenders may consider hybrid approaches. The documentation method that shows your strongest income picture typically produces the best loan terms.
Credit requirements vary by lender and loan amount. Many programs accept scores as low as 620-640, though higher scores unlock better rates and terms for Solana Beach properties.
Lenders average your monthly deposits over 12-24 months, then apply a percentage (typically 50-75%) to account for business expenses. The exact percentage depends on your business type and expense profile.
Yes, both 1099 and bank statement loans can finance investment properties, though you may need larger down payments (typically 20-25%) and face different rate structures than primary residences.
Lenders usually average multiple years and may weight recent income more heavily. Bank statement loans might work better if your income fluctuates, since they show current cash flow rather than historical tax forms.