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in Cupertino, CA
Cupertino's thriving tech sector creates unique income patterns for many self-employed professionals. Traditional mortgage underwriting often struggles to capture the full financial picture of contractors, consultants, and business owners.
Both 1099 Loans and Bank Statement Loans offer non-QM solutions designed specifically for self-employed borrowers. Each approach verifies income differently, making one potentially better suited to your documentation style and business structure.
Understanding how these two loan types work helps you choose the path that aligns with your financial records. The right option depends on how you receive income and what documentation you maintain.
1099 Loans use your 1099-MISC or 1099-NEC forms to verify income from contract work. Lenders typically review one to two years of 1099 forms along with personal tax returns to establish your qualifying income.
This approach works well for independent contractors with straightforward 1099 income. You'll need consistent contract earnings and clean documentation showing your revenue stream without extensive business deductions.
The process resembles traditional mortgage underwriting but accommodates non-W-2 income. Lenders calculate your income based on the 1099 amounts, making it easier if you don't write off significant business expenses.
Rates vary by borrower profile and market conditions. Your credit score, down payment, and income stability all influence the terms you receive.
Bank Statement Loans analyze 12 to 24 months of personal or business bank statements to determine qualifying income. Lenders examine deposits to calculate your average monthly cash flow.
This option shines for business owners who write off substantial expenses on tax returns. Since the analysis focuses on gross deposits rather than taxable income, it captures earning power that tax returns might understate.
The underwriter reviews statements for consistency and calculates income using either 100% or 50% of deposits, depending on whether you provide personal or business accounts. This method reveals your true cash flow.
Bank Statement Loans offer flexibility for borrowers with variable income patterns. Rates vary by borrower profile and market conditions, with pricing reflecting the alternative documentation approach.
The core difference lies in documentation type. 1099 Loans require specific tax forms showing contract income, while Bank Statement Loans need consistent monthly deposits in your accounts.
Income calculation methods vary significantly. 1099 Loans use reported amounts on tax forms, similar to traditional mortgages. Bank Statement Loans calculate income from deposit activity, often revealing higher qualifying amounts for borrowers with business expenses.
Borrower profiles differ between programs. 1099 Loans suit contractors with clean 1099 income who don't heavily leverage deductions. Bank Statement Loans better serve business owners maximizing tax write-offs or those with multiple income streams.
Documentation burden varies by situation. 1099 Loans need organized tax returns and forms. Bank Statement Loans require consecutive monthly statements without gaps, which can be easier if you maintain digital banking.
Choose 1099 Loans if you receive straightforward contractor income with minimal business deductions. This path makes sense when your tax returns accurately reflect your earning power and you have consistent 1099 documentation.
Bank Statement Loans work better if you own a business with significant write-offs or receive income through multiple channels. This option helps when your tax returns show lower income than your actual cash flow supports.
Consider your documentation availability and income consistency. Can you easily provide 12-24 months of clean bank statements? Or do you have organized 1099 forms and tax returns ready? Your record-keeping style matters.
Working with an experienced non-QM lender helps you evaluate both options against your specific situation. SRK Capital can review your documentation and recommend the approach that maximizes your qualifying income while meeting your timeline.
Yes, some borrowers qualify for both programs. A lender can run scenarios to determine which option produces better loan terms and qualifying amounts based on your specific documentation.
Non-QM loans typically carry slightly higher rates due to alternative documentation. However, they provide access to financing that conventional programs can't offer for self-employed borrowers.
Down payment requirements typically range from 10% to 20% for both loan types. Your specific requirement depends on property type, loan amount, and overall borrower profile.
Most lenders require minimum credit scores between 620 and 680 for these programs. Higher scores generally unlock better rates and terms for both loan types.
Timeline varies by documentation completeness but typically takes 30-45 days. Having organized records and responding quickly to requests speeds the process considerably.