Loading
in San Bruno, CA
Self-employed professionals in San Bruno face unique challenges when seeking mortgage financing. Traditional lenders often struggle to evaluate income that doesn't come from a W-2, making conventional loans difficult to obtain.
Both 1099 loans and bank statement loans serve self-employed borrowers, but they use different methods to verify income. Understanding these differences helps you choose the right financing path for your San Bruno home purchase.
These non-QM (non-qualified mortgage) options provide flexibility that traditional mortgages cannot match. Each approach has distinct requirements, advantages, and ideal borrower profiles.
1099 loans verify income using your 1099 tax forms from clients or employers. Lenders typically review 12 to 24 months of 1099 documentation to establish your qualifying income and assess stability.
This option works well for independent contractors, consultants, and freelancers who receive most income through 1099 forms. Your tax returns and 1099s create a clear income picture without requiring bank statement analysis.
Lenders calculate qualifying income by averaging your 1099 earnings over the review period. This straightforward approach benefits borrowers with consistent 1099 income streams and minimal business expenses.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to determine income. Lenders review your statements to calculate average monthly deposits, applying standard expense ratios to estimate qualifying income.
This program suits business owners, self-employed professionals, and entrepreneurs who have significant business expenses. Bank statements show gross revenue before deductions that might reduce taxable income on tax returns.
The verification process focuses on cash flow rather than taxable income. This approach often reveals higher qualifying income for borrowers who write off substantial business expenses but maintain strong deposit patterns.
The primary distinction lies in documentation: 1099 loans require tax forms while bank statement loans analyze deposit patterns. This difference significantly impacts which borrowers qualify for higher loan amounts under each program.
Income calculation methods vary considerably. 1099 loans use reported earnings directly, while bank statement loans apply percentage factors (typically 50-75%) to gross deposits to account for business expenses.
Borrowers with substantial write-offs often qualify for more with bank statement loans since deposits reflect pre-expense revenue. Conversely, 1099 borrowers benefit when their reported income closely matches actual earnings without heavy deductions.
Interest rates and down payment requirements remain similar between programs, though specific terms vary by borrower profile and market conditions. Both typically require 10-20% down and carry slightly higher rates than conventional loans.
Choose 1099 loans if you receive most income through 1099 forms with minimal business expenses. This option provides simpler documentation and clearer income verification when your 1099s accurately reflect your financial capacity.
Bank statement loans make more sense for business owners with significant operating expenses or multiple revenue streams. If your tax returns show lower income due to legitimate write-offs, bank statements reveal your true cash flow.
San Bruno borrowers should consider their specific income structure. Review your past year's 1099s and bank statements to see which method presents your income more favorably for loan qualification.
Working with a lender experienced in both programs helps you identify the best fit. They can pre-qualify you under both scenarios to determine which delivers better loan terms for your San Mateo County purchase.
Generally, lenders use one verification method per loan. However, some programs allow combining documentation types. Discuss your specific income mix with your lender to find the optimal approach.
Rates vary by borrower profile and market conditions. Neither option consistently offers better rates—your credit score, down payment, and overall financial profile determine pricing more than the documentation type.
Both programs typically require 12 to 24 months of documentation. Longer histories demonstrate income stability and often result in better loan terms and approval likelihood.
No. While conventional loans often require 620+ scores, these non-QM options can work with scores as low as 600. Lower scores may require larger down payments and carry higher rates.
Yes, but underwriters average your income over the review period. Consistent seasonal patterns are acceptable. Be prepared to explain any significant fluctuations during the application process.