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in Goleta, CA
Self-employed professionals in Goleta face unique challenges when qualifying for a mortgage. Traditional lenders often struggle to evaluate income that doesn't come from a W-2, leaving many entrepreneurs and contractors with limited options.
Both 1099 loans and bank statement loans offer solutions for self-employed borrowers in Santa Barbara County. These non-QM products use alternative documentation methods to verify your income, but they work in different ways and suit different financial situations.
1099 loans use your 1099 forms to document income from client relationships. Lenders typically review 12 to 24 months of 1099s to establish your earning pattern and qualify you for financing.
This option works best if you receive most of your income through 1099 forms from a consistent set of clients. The process is straightforward for borrowers who maintain organized tax records and have predictable contractor relationships.
Rates vary by borrower profile and market conditions. Your credit score, down payment amount, and income stability all influence the terms you'll receive.
Bank statement loans analyze deposits in your business or personal bank accounts to calculate qualifying income. Lenders examine 12 to 24 months of statements, using deposit patterns to determine your average monthly income.
This approach benefits business owners who write off significant expenses, reducing their taxable income. The lender calculates income based on deposits rather than what shows on your tax return, potentially qualifying you for a larger loan amount.
Rates vary by borrower profile and market conditions. Expect to provide detailed bank statements and explanations for large or irregular deposits during underwriting.
The primary difference lies in documentation requirements. 1099 loans need tax forms from clients, while bank statement loans require detailed account records. Your income type determines which documentation you can more easily provide.
Bank statement loans often work better if you have complex business expenses that reduce your taxable income. A Goleta consultant who grosses significant revenue but shows minimal net income on taxes might qualify for more with bank statements than with 1099s.
1099 loans typically have a more straightforward underwriting process when your income sources are simple and well-documented. Fewer clients and clearer income trails make verification easier for lenders.
Choose a 1099 loan if you work with established clients who issue regular 1099 forms and your tax returns accurately reflect your income. This option suits IT contractors, consultants, and freelancers with straightforward income documentation.
Select a bank statement loan if you own a business with substantial expenses, operate a cash-intensive business, or your tax returns don't reflect your true earning capacity. Many Goleta small business owners find this option reveals income that traditional documentation misses.
Consider your record-keeping habits too. If maintaining organized bank statements feels easier than tracking multiple 1099s, that practical factor matters. Both options serve self-employed borrowers — the right choice depends on how your business operates and how you document income.
Some lenders allow hybrid documentation, though most programs use one primary method. The approach depends on which shows your income most favorably and meets the lender's specific program requirements.
Non-QM loans typically require 10-20% down, compared to as little as 3% for conventional loans. The exact amount depends on your credit profile, the property type, and the specific lender's requirements.
Expect 30-45 days for either option. Bank statement loans may take slightly longer due to deposit verification and explanation requirements for irregular transactions.
Rates vary by borrower profile and market conditions. Non-QM loans typically carry higher rates than conventional mortgages due to alternative documentation and increased lender risk, often 1-3% higher.
Most lenders require minimum credit scores of 620-660 for non-QM loans. Higher scores improve your rate and terms. Some programs accept lower scores with larger down payments.