Loading
in Sebastopol, CA
Sebastopol's self-employed community — from tech consultants to vineyard managers — needs mortgage options that work with variable income. Traditional W-2 underwriting doesn't fit how most independent contractors actually earn.
Both 1099 loans and bank statement loans solve this problem differently. One uses your tax forms. The other uses your deposits. Which route you take depends on how you structure your business income and write-offs.
1099 loans use your 1099 forms from the past one or two years to calculate income. Lenders add up what clients paid you, then apply a percentage (typically 75-90%) to account for business expenses.
This works cleanly if you receive most income through 1099s and don't run major expenses through your business. The underwriter doesn't need to see bank statements or profit-and-loss statements — just your 1099s and personal tax returns.
Credit requirements start around 620, though better rates kick in at 680. Down payment minimums run 10-15% for most programs. Rates typically price 0.5-1.5% above conventional loans.
Bank statement loans ignore tax returns entirely. Underwriters review 12 or 24 months of bank deposits to calculate average monthly income. They apply expense ratios (typically 25-50%) based on your business type.
This route works better if you write off substantial business expenses that reduce taxable income. The bank sees gross deposits before deductions eat into what tax returns show.
Credit minimums match 1099 programs at 620-640. Down payments start at 10%, though 15-20% gets better pricing. Expect rates 1-2% above conventional, with lower expense ratios earning better terms.
The core split: 1099 loans care about what clients paid you. Bank statement loans care about what hit your accounts. If you write off 40% of revenue, your 1099 loan qualification drops by that same amount. Bank statement programs only reduce income by a standard expense ratio.
Documentation differs sharply. 1099 loans need clean tax returns with minimal Schedule C losses. Bank statement loans skip tax returns but require consistent deposit patterns — irregular months or large one-time deposits complicate underwriting.
Rates vary by borrower profile and market conditions. Bank statement programs typically price slightly higher because they assume more aggressive write-offs. That rate gap narrows if you qualify with 20%+ down and 700+ credit.
Choose 1099 loans if you receive most income through contractor payments and don't write off much. Your tax returns show strong income. You want simpler documentation and slightly better rates.
Go bank statement if you legitimately expense 30%+ of revenue through your business. Tax returns don't reflect real cash flow. You can document 12-24 months of consistent deposits in business or personal accounts.
Many Sebastopol contractors bounce between structures as businesses grow. A vineyard consultant starting out might use 1099 loans. Five years later with equipment purchases and hired help, bank statements make more sense. Your accountant's tax strategy drives which program fits.
No — lenders pick one income calculation method. Some borrowers split income sources, using 1099 for contractor work and bank statements for side business revenue.
Personal accounts work fine if deposits clearly show business income. Mixing personal and business funds doesn't disqualify you — underwriters see it constantly.
1099 loans typically close 3-5 days quicker because documentation is simpler. Bank statement underwriting takes longer to analyze deposit patterns and verify sources.
Lenders average the past two years, so one weak year gets blended. If the trend looks downward, bank statements showing current deposits might qualify you higher.
Both programs go up to $3-4 million in Sonoma County with strong credit and down payment. Jumbo pricing adds 0.25-0.5% to rates beyond conforming limits.