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in San Mateo, CA
San Mateo's thriving tech and professional services economy creates unique opportunities for self-employed borrowers. Both 1099 loans and bank statement loans serve contractors and business owners, but they verify income differently.
Choosing the right loan depends on how you receive income and what documentation you can provide. Understanding these differences helps you select the most favorable option for your situation.
1099 loans use your annual 1099 forms to verify income from clients and employers. Lenders typically review one to two years of 1099 documentation to establish your qualifying income.
This option works well if you receive most income through 1099 forms rather than direct deposits. The documentation is straightforward: your tax returns and 1099 forms create a clear income picture.
Lenders may apply a percentage of your gross 1099 income based on your profession and typical business expenses. This approach recognizes that contractors have legitimate costs that reduce net income.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to determine income. Lenders calculate average monthly deposits and apply them to qualifying ratios.
This option benefits borrowers who receive income through various channels or reinvest heavily in their business. You don't need to show traditional profit-and-loss statements or extensive tax documentation.
Lenders typically use 50% to 100% of average deposits as qualifying income, depending on the deposit types and consistency. Personal bank statements usually receive higher percentages than business accounts.
The primary difference lies in documentation: 1099 loans require specific tax forms, while bank statement loans focus on deposit history. If you receive formal 1099s from clients, that path may be simpler.
Bank statement loans offer more flexibility for business owners who write off significant expenses or mix personal and business income. They capture cash flow that might not appear on tax returns.
Credit requirements and down payments remain similar between both options. Rates vary by borrower profile and market conditions, though bank statement loans sometimes carry slightly higher rates due to added complexity.
Choose a 1099 loan if you receive most income through documented 1099 forms and your tax returns reflect your true earning capacity. This path offers straightforward verification with familiar documents.
Select a bank statement loan if you write off substantial business expenses, receive income through multiple channels, or show less income on tax returns than you actually earn. This option captures real cash flow.
Many San Mateo borrowers work with both options during pre-approval to see which yields better terms. A qualified non-QM lender can run scenarios and recommend the strongest path for your specific situation.
Lenders typically use one method or the other, not both simultaneously. However, you can apply using both approaches to see which qualifies you for better terms.
Most non-QM loans require 10-20% down, slightly higher than conventional options. The exact amount depends on your credit score, loan amount, and property type.
Expect 30-45 days for closing. Bank statement loans may take slightly longer due to the detailed deposit analysis required during underwriting.
For 1099 loans, you'll need tax returns your CPA prepared. Bank statement loans require minimal CPA involvement since they focus on deposit history rather than tax filings.
Yes, you can refinance between these options or into a conventional loan once your documentation supports traditional qualifying methods.