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in Milpitas, CA
Self-employed borrowers in Milpitas have two strong non-QM options for mortgage financing. Both 1099 loans and bank statement loans bypass traditional income verification, making homeownership accessible for entrepreneurs and independent contractors.
The right choice depends on how you receive income and what documentation you prefer to provide. Understanding the differences helps you pick the path that aligns with your business structure and financial situation.
1099 loans use your annual 1099 forms to verify income for mortgage qualification. This option works well for independent contractors, freelancers, and consultants who receive 1099 income from clients rather than W-2 wages.
Lenders typically review one to two years of 1099 forms to establish your income pattern. This approach is straightforward if you have consistent 1099 earnings and keep clear records of your contract work.
The process focuses on the gross income reported on your 1099 forms. You'll still need standard documentation like tax returns, but the 1099 forms serve as the primary income verification tool for underwriting.
Bank statement loans analyze 12 to 24 months of personal or business bank deposits to calculate qualifying income. This option serves self-employed borrowers who may have complex income streams or significant business expenses.
Lenders review your bank statements to identify regular deposits, then apply an expense factor to determine net income. This method works particularly well for business owners whose tax returns show lower income due to legitimate write-offs.
The bank statement approach captures the actual cash flow through your accounts. You can use personal statements, business statements, or a combination, depending on where you deposit client payments and business revenue.
The main distinction lies in documentation: 1099 loans require specific tax forms from clients, while bank statement loans need monthly account statements. If you receive most income via 1099 forms with minimal business expenses, the 1099 route may be simpler.
Bank statement loans offer more flexibility for borrowers with multiple income sources or those who maximize tax deductions. The statement analysis can reveal higher qualifying income than tax returns alone would show.
Both programs typically require down payments of 10-20% and may have higher rates than conventional loans. Rates vary by borrower profile and market conditions, so your credit score and property type significantly impact pricing.
Choose 1099 loans if you're an independent contractor with straightforward client relationships and clean 1099 income. This option works best when your annual 1099 forms accurately reflect your earning power without significant business expense complications.
Bank statement loans make sense for business owners who reinvest heavily, have multiple revenue streams, or prefer not to rely on 1099 documentation. This path shines when your bank deposits tell a stronger income story than your tax returns.
Many Milpitas borrowers qualify for both programs. A mortgage advisor can review your specific situation—your income documentation, business structure, and financial goals—to recommend the better fit for your home purchase or refinance.
Generally, lenders use one method or the other for income calculation. Your loan officer will determine which documentation presents your income most favorably and proceed with that approach.
Non-QM loans typically carry higher rates than conventional financing due to flexible underwriting. Rates vary by borrower profile and market conditions, with your credit score and down payment affecting pricing.
Lenders apply an expense factor, typically counting 50-75% of deposits as qualifying income. The exact percentage depends on whether you use personal or business statements and your expense documentation.
Most lenders require minimum credit scores of 620-660 for both 1099 and bank statement loans. Higher scores unlock better rates and terms, making 700+ scores particularly advantageous.
Yes, both loan types work for investment properties and second homes. Expect slightly higher down payment requirements and rates for non-owner-occupied purchases compared to primary residences.