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in Santa Maria, CA
Self-employed professionals in Santa Maria face unique challenges when qualifying for a mortgage. Traditional lenders often overlook the income reality of business owners and independent contractors.
Both 1099 loans and bank statement loans offer alternatives for self-employed borrowers in Santa Barbara County. Each uses different documentation to verify your income, making one potentially easier depending on how you structure your business finances.
Understanding which option aligns with your tax strategy and business structure can save you time and help you secure better terms on your Santa Maria home purchase.
1099 loans use your tax forms to calculate qualifying income, making them ideal for contractors and freelancers who receive 1099-MISC or 1099-NEC forms. Lenders typically average your 1099 income over one or two years to determine what you can borrow.
This option works best when your 1099 income shows consistent earnings without heavy business deductions. If you claim minimal expenses and show strong gross income on your tax returns, a 1099 loan can be straightforward.
Santa Maria business owners who keep simple books and don't write off significant expenses often find this the cleaner path. You'll need tax returns and your actual 1099 forms from clients or platforms you work with.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to verify income. Lenders calculate your average monthly deposits and apply that figure to determine your borrowing power.
This approach shines for business owners who write off substantial expenses to reduce tax liability. Your bank statements show actual cash flow before deductions, potentially qualifying you for a larger loan amount than your tax returns would suggest.
Santa Barbara County entrepreneurs who maximize tax deductions often benefit from this method. The lender focuses on money flowing through your accounts rather than taxable income, which can paint a stronger financial picture.
The primary difference lies in documentation: 1099 loans rely on tax forms showing reported income, while bank statement loans examine actual deposits. This distinction matters significantly if you aggressively reduce taxable income through write-offs.
Bank statement loans typically require longer documentation periods but can reveal higher qualifying income. If your tax returns show modest income after deductions but your bank statements reflect strong cash flow, this route often wins.
Both options generally require higher down payments than conventional loans and may carry slightly higher rates. Rates vary by borrower profile and market conditions, but expect similar pricing between the two since both fall under non-QM lending.
Choose a 1099 loan if you receive most income via 1099 forms and claim few business expenses on your taxes. This works well for consultants, gig workers, and contractors with straightforward income structures who file accurate returns showing strong earnings.
Opt for a bank statement loan if you operate a business with significant write-offs, own rental properties, or show lower taxable income than your actual cash flow. This includes Santa Maria restaurant owners, retail operators, and professionals who maximize legitimate deductions.
Consider your documentation readiness too. If organizing 24 months of bank statements sounds daunting but you have clean tax returns with 1099s handy, that practical reality should influence your choice.
Some lenders offer hybrid approaches, but most loans follow one primary documentation method. Your loan officer will recommend the approach that shows your strongest qualifying income based on your specific financial situation.
Generally yes. Most non-QM lenders look for credit scores of 620 or higher, with better terms available at 680 and above. Your specific score requirements depend on down payment size and overall borrower profile.
Expect to put down at least 10-15% for most non-QM programs, with 20% down opening better rate options. Larger down payments can offset other risk factors and improve your terms significantly.
Yes. For 1099 loans, lenders average your annual 1099 income over one or two years. Bank statement loans average monthly deposits over the 12 or 24-month period reviewed to calculate qualifying income.
Many non-QM lenders allow investment property purchases using 1099 or bank statement documentation. However, expect stricter requirements including larger down payments and potentially higher rates for non-owner-occupied properties.