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in Foster City, CA
Self-employed borrowers in Foster City have two strong non-QM options for mortgage financing. Both 1099 Loans and Bank Statement Loans help independent contractors and business owners qualify without traditional W-2 income documentation.
The right choice depends on how you receive income and what documentation you can provide. Understanding the differences helps you choose the path that showcases your financial strength most effectively.
1099 Loans use your 1099 forms to verify income for mortgage qualification. This option works well for independent contractors, consultants, and freelancers who receive 1099 income from clients.
Lenders typically review one to two years of 1099 forms to calculate your qualifying income. This straightforward approach works best when your 1099 income is substantial and consistent.
These loans avoid the business expense deductions that often reduce taxable income on tax returns. The focus stays on your gross 1099 earnings, which can result in higher qualifying amounts than traditional mortgage calculations.
Bank Statement Loans analyze 12 to 24 months of personal or business bank statements to determine income. This option serves business owners and self-employed professionals whose income flows through their accounts rather than appearing on 1099 forms.
Lenders calculate average monthly deposits and apply an expense ratio to estimate your qualifying income. This method captures income that might not show up clearly on tax returns due to business write-offs.
The bank statement approach offers flexibility for borrowers with complex income streams. Whether you run a retail business, provide services through your own company, or have multiple income sources, this documentation tells your complete financial story.
The primary difference lies in documentation type. 1099 Loans require 1099 forms showing income from clients, while Bank Statement Loans use deposit activity in your accounts. Your income structure determines which option provides stronger qualification.
Income calculation methods also differ significantly. 1099 Loans focus on your reported 1099 income directly. Bank Statement Loans analyze total deposits and subtract an estimated expense percentage, typically 25% to 50% depending on your business type.
Foster City professionals who receive most income via 1099 forms often find that route more straightforward. Business owners who take owner draws or have income that flows differently may qualify for larger loan amounts using bank statements.
Choose 1099 Loans if you work as an independent contractor or consultant receiving most income on 1099 forms. This option provides a clean path when your 1099 amounts are strong and consistent year over year.
Bank Statement Loans make more sense for business owners, sole proprietors, or self-employed professionals whose income shows best through account deposits. This approach works particularly well if you have significant business expenses that reduce your taxable income.
Consider your specific situation in Foster City's competitive housing market. A mortgage broker can review your documentation and determine which option maximizes your buying power. Rates vary by borrower profile and market conditions for both loan types.
Most lenders require choosing one documentation method. However, some programs allow combining income sources. A mortgage broker can identify the approach that maximizes your qualifying income.
1099 Loans typically require one to two years of 1099 forms. Bank Statement Loans need 12 to 24 months of consecutive statements. Longer history often strengthens your application.
Non-QM loans including both options typically carry rates 0.5% to 2% higher than conventional loans. The specific rate depends on your credit score, down payment, and loan amount.
Most programs require minimum credit scores between 620 and 680. Higher scores improve your rate and terms. Strong income documentation can sometimes offset lower credit scores.
Yes, both 1099 Loans and Bank Statement Loans work for primary residences, second homes, and investment properties. Requirements may vary by property type and intended use.