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in Daly City, CA
Self-employed borrowers in Daly City face unique challenges when applying for a mortgage. 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 paths to homeownership without traditional income documentation. These non-QM options help self-employed buyers qualify based on their actual earnings, not just what appears on tax returns.
Understanding which option fits your income structure makes the application process smoother. The right choice depends on how you receive payments and what documentation you can provide.
1099 loans use your 1099 forms to verify income for mortgage qualification. Lenders review one or two years of 1099 documentation to establish your earning pattern and calculate qualifying income.
This option works well for independent contractors who receive consistent 1099 income from clients. Freelancers, consultants, and gig workers who maintain steady contract relationships often find this the most straightforward path.
Lenders typically average your 1099 income over the review period to determine your qualifying amount. You'll need fewer bank statements compared to other self-employed loan options, though some documentation of deposits may still be required.
Bank statement loans use 12 to 24 months of personal or business bank statements to calculate your income. Lenders analyze deposits to determine your average monthly income, typically using a percentage of total deposits.
This option benefits business owners and self-employed professionals with varied income sources. If you write off significant expenses on tax returns or receive payments through multiple channels, bank statement loans may show your true earning capacity.
The bank statement method often reveals higher qualifying income than tax returns show. Lenders typically use 50% to 75% of deposits as qualifying income, depending on your business type and expense structure.
The main difference lies in documentation requirements and income calculation methods. 1099 loans use the gross income from your forms, while bank statement loans calculate based on deposit patterns minus an estimated expense percentage.
Bank statement loans require more extensive documentation but can capture income that doesn't appear on 1099 forms. Cash-heavy businesses, multiple income streams, and irregular payment schedules often show better with bank statements.
1099 loans typically offer faster processing since the income calculation is more straightforward. If you receive most income through official 1099s and have minimal cash transactions, this path involves less paperwork and fewer steps.
Choose 1099 loans if you're an independent contractor with clear, documented 1099 income. This works best when your tax returns accurately reflect your earning capacity and you don't write off substantial business expenses.
Bank statement loans make sense for business owners who maximize tax deductions or receive income through multiple channels. If your tax returns show significantly less than you actually earn, bank statements tell a more complete story.
Consider your documentation availability and how you receive payments. Daly City self-employed buyers with organized bank records spanning 12-24 months can often qualify for larger loan amounts through the bank statement route.
Neither option is universally better—the right choice matches your specific income pattern. A mortgage professional can review your documentation and recommend the path most likely to achieve your financing goals.
Some lenders allow hybrid approaches, but most require choosing one primary verification method. Your loan officer can determine which single method qualifies you for the best terms based on your documentation.
Non-QM loans typically carry slightly higher rates than conventional options due to flexible underwriting. Rates vary by borrower profile and market conditions, so the difference depends on your complete financial picture.
Most lenders require 12 to 24 months of documentation. Two years of history provides stronger qualification, though some programs accept 12 months for borrowers with excellent credit and reserves.
Bank statement loans handle income fluctuations better since they average deposits over time. 1099 loans also work with variable income by calculating an average across the review period.
Some programs accept one year of self-employment history, especially if you worked in the same field previously. Strong credit, significant reserves, and larger down payments improve approval odds with shorter histories.