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in Buellton, CA
Self-employed professionals in Buellton face unique challenges when qualifying for a mortgage. Traditional lenders rely on W-2 income verification, which doesn't work for independent contractors, freelancers, and business owners.
Both 1099 loans and bank statement loans offer paths to homeownership for self-employed borrowers in Santa Barbara County. These non-QM options verify income differently than conventional mortgages, making them valuable alternatives for those who don't fit the traditional employment mold.
Understanding the differences between these two loan types helps you choose the right financing for your Buellton home purchase. Each approach has distinct documentation requirements and benefits depending on how you structure your business income.
1099 loans verify income using your 1099 forms from clients and contractors. Lenders typically review one to two years of 1099 documentation to calculate your qualifying income.
This option works well for independent contractors who receive most of their income through 1099 forms. The process is straightforward if you maintain organized records and have consistent client relationships.
Lenders may average your 1099 income over the review period to determine your qualifying amount. Business expenses aren't typically deducted from your income the same way they are on tax returns, which can help you qualify for more.
Bank statement loans use 12 to 24 months of personal or business bank statements to verify income. Lenders analyze deposits to calculate your monthly qualifying income.
This approach benefits business owners who write off significant expenses and show lower taxable income on tax returns. Bank statements reveal actual cash flow rather than net income after deductions.
You can use personal bank statements, business statements, or a combination of both. Lenders typically apply a percentage factor to total deposits, accounting for business expenses without requiring detailed profit and loss statements.
The primary difference lies in documentation: 1099 loans require tax forms from clients, while bank statement loans analyze account deposits. Your income structure determines which documentation you can provide more easily.
1099 loans work best when you receive most income through contractor payments. Bank statement loans serve borrowers with diverse income sources, including cash deposits, transfers, and mixed business revenue.
Income calculation methods differ significantly. 1099 loans total your contractor income directly, while bank statement loans apply a percentage to deposits based on your business structure. Rates vary by borrower profile and market conditions for both options.
Both programs typically require credit scores of 620 or higher and down payments starting at 10 to 20 percent. Documentation requirements are the main differentiator in qualifying for Buellton properties.
Choose a 1099 loan if you work as an independent contractor with clear 1099 documentation from clients. This option makes sense when your income arrives through contractor relationships and you maintain organized tax records.
Bank statement loans suit business owners who write off substantial expenses or have income that doesn't flow through 1099 forms. If your tax returns show lower income than your actual earnings, bank statements tell a more complete story.
Consider your documentation availability and income structure when deciding. Some borrowers qualify for both options but find one easier based on their record-keeping practices and business operations.
Working with an experienced mortgage broker helps you determine which program offers better terms for your specific situation. The right choice depends on your income sources, documentation, and financial goals for your Buellton home purchase.
Some lenders allow combining documentation types, but most programs require choosing one verification method. Your broker can help identify which single approach provides the strongest qualification for your Buellton purchase.
Non-QM loans typically carry slightly higher rates than conventional financing due to flexible underwriting. Rates vary by borrower profile and market conditions, but many self-employed borrowers find the terms competitive.
Most 1099 loan programs require one to two years of documentation. Bank statement loans typically need 12 to 24 months of consistent statements to establish income patterns.
Most programs require minimum credit scores of 620, though some lenders prefer 640 or higher. Stronger credit profiles often qualify for better rates and terms in Buellton.
Both 1099 and bank statement loans can finance investment properties, though requirements may be stricter. Expect higher down payments and reserve requirements for non-owner-occupied purchases in Santa Barbara County.