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in Paso Robles, CA
Self-employed borrowers in Paso Robles face a common challenge: traditional lenders often struggle to verify income without W-2s. Both 1099 loans and bank statement loans solve this problem, but they work differently.
These non-QM mortgage options give self-employed professionals access to homeownership in San Luis Obispo County. The right choice depends on how you document your income and structure your business.
Understanding the differences between these two programs helps you choose the path with the smoothest approval process and best terms for your situation.
1099 loans verify income using your 1099 forms from clients or companies you contract with. Lenders review one to two years of 1099 documentation to establish your earning capacity.
This option works well for independent contractors who receive clear 1099 income without complex business deductions. Your income is straightforward to calculate from the forms you already receive.
Rates vary by borrower profile and market conditions. Down payment requirements typically start at 10-15% for owner-occupied properties in Paso Robles.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to determine your income. Lenders calculate your average monthly deposits and apply expense ratios to estimate qualifying income.
This approach benefits business owners who write off significant expenses or have income flowing through multiple sources. Your actual cash flow matters more than what shows on tax returns.
The program accommodates various business structures, from sole proprietors to LLC owners. Rates vary by borrower profile and market conditions, with down payments typically starting at 10-20%.
The primary difference lies in documentation: 1099 loans need your contractor income forms, while bank statement loans need your banking history. Your business structure often determines which works better.
1099 loans suit contractors with clear, direct payments from clients. Bank statement loans fit business owners who run expenses through their company or have variable income streams that don't show well on 1099s.
Processing timelines differ slightly. 1099 loans may move faster when your income is straightforward. Bank statement loans require more analysis but accommodate complex financial situations that 1099 documentation can't capture.
Choose a 1099 loan if you're an independent contractor receiving most income directly from clients via 1099 forms. This path offers simpler documentation and potentially faster processing when your income is consistent.
Select a bank statement loan if you own a business with significant write-offs, have multiple income sources, or show lower taxable income than actual cash flow. This option captures your true earning power better than tax forms.
Many Paso Robles self-employed buyers qualify for both programs. A mortgage broker can analyze your specific situation and recommend the option that maximizes your borrowing power while minimizing documentation hassles.
Your business structure matters: sole proprietors with simple contractor arrangements lean toward 1099 loans, while established businesses with complex finances benefit from bank statement analysis.
Generally, lenders require you to choose one income verification method. However, a broker can help determine which approach shows your income most favorably for your Paso Robles home purchase.
Non-QM loans like these typically carry slightly higher rates than conventional financing due to flexible qualification standards. Rates vary by borrower profile and market conditions.
Most lenders require 12-24 months of documentation. Two years is standard for 1099 loans, while bank statement loans may accept 12 months for established businesses with strong cash flow.
Minimum credit scores typically start around 620-640 for both programs. Higher scores improve your rate and terms. Some lenders may require higher scores depending on other risk factors.
Yes, both programs work for investment properties in Paso Robles. Down payment requirements increase for non-owner-occupied purchases, typically starting at 20-25% for rental properties.