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in Los Altos, CA
Self-employed professionals in Los Altos have two strong non-QM mortgage options: 1099 loans and bank statement loans. Both programs bypass traditional W-2 income verification, making homeownership accessible for contractors and business owners in Santa Clara County.
The right choice depends on how you receive income and what documentation you can provide. Understanding the differences helps you move forward with confidence in Los Altos's competitive real estate market.
1099 loans use your 1099 forms from the past one or two years to verify income. This option works well for independent contractors who receive 1099-MISC or 1099-NEC forms from clients rather than traditional paychecks.
Lenders calculate your qualifying income by averaging your 1099 earnings over the documentation period. They may apply a factor to account for business expenses, though typically less aggressive than standard tax return analysis.
These loans appeal to consultants, freelancers, and gig economy workers in Los Altos who maintain steady contractor relationships. The documentation process is straightforward if you keep organized tax records.
Bank statement loans analyze deposits in your personal or business accounts over 12 to 24 months. This approach captures your actual cash flow rather than taxable income, which helps borrowers who write off substantial business expenses.
Lenders review monthly statements to identify income deposits, filtering out transfers and non-income transactions. They typically apply a percentage factor to account for estimated expenses based on your business type.
This option benefits business owners in Los Altos who show strong cash flow but minimal taxable income. It's particularly useful for borrowers with complex income streams or multiple revenue sources feeding into their accounts.
The primary difference lies in documentation type: 1099 loans require specific tax forms, while bank statement loans need account statements. Bank statement loans often accommodate higher qualifying income for borrowers with significant write-offs.
1099 loans typically serve straightforward contractor arrangements with clear 1099 forms. Bank statement loans handle more complex situations including mixed income sources, cash businesses, or borrowers operating multiple business entities.
Interest rates and terms vary by borrower profile and market conditions. Both programs may require larger down payments than conventional loans, though competitive options exist for well-qualified applicants in Santa Clara County.
Choose 1099 loans if you primarily receive contractor income through 1099 forms and your taxable income accurately reflects your earning power. This path offers simpler documentation and works well when your write-offs are minimal.
Bank statement loans make sense when you operate a business with substantial deductions, show strong deposits but lower taxable income, or have income from multiple sources. They're also ideal if you don't receive traditional 1099 forms.
Many Los Altos borrowers qualify for both programs. A local mortgage broker can analyze your specific situation, review your documentation, and recommend the option that maximizes your purchasing power while meeting your financial goals.
Generally, lenders structure loans around one primary income verification method. However, some programs may consider supplementary documentation to strengthen your application or explain income variations.
Most programs require 12 to 24 months of documentation. Two years of consistent income history typically yields better terms and higher qualifying amounts for Los Altos borrowers.
Non-QM loans often require 10-20% down, though some programs accept less for well-qualified borrowers. Your specific down payment depends on credit profile, income documentation strength, and property type.
Requirements vary by lender. Some bank statement programs minimize tax return requirements, while 1099 loans may request returns to verify the 1099 income reported. Recent write-offs matter less with bank statement programs.
Rates vary by borrower profile and market conditions. Non-QM rates typically run higher than conventional mortgages but remain competitive for self-employed borrowers who don't fit traditional lending boxes.