Mortgage Options for California Freelancers, Gig Workers, and 1099 Employees

California is home to thousands of freelance and “gig economy” workers who use the 1099 form, as opposed to the W-2 used by traditionally employed workers. And that can present challenges when those same freelancers and gig workers apply for a mortgage loan to buy a house. Traditional banks and lenders prefer to use the W-2 when approving applicants for home loans.

But that doesn’t mean “1099 employees” are out of options. Alternative financing methods, like the bank statement loan, can help California gig workers and independent contractors make the transition into homeownership.

In this article, we’ll discuss the primary features and benefits of the bank statement loan, as it applies to freelancers and gig economy workers in the Golden State.

Gig Economy Alive and Well in California

The so-called gig economy accounts for a large portion of California’s overall economy. According to UC San Francisco: “By some estimates, California’s alternate or gig work economy makes up to 40 percent of the state’s workforce.”

This sector of the labor market includes short-term contracts, on-demand services, and freelance work — as opposed to permanent jobs. Gig economy jobs include everything from freelance writers to Uber drivers. Most independent contractors fall into this category as well, since they typically receive 1099s from their clients.

The bottom line here is that freelancers and gig workers make up a huge part of California’s workforce. But, unfortunately, many of them might be underserved when it come to mortgage financing.

Mortgage Challenges for Freelance and Gig Workers

To qualify for a “traditional” home loan, borrowers typically have to present their IRS W-2 forms and pay stubs. Lenders request these documents to verify the borrower’s income status.

But independent contractors and gig workers often lack this kind of documentation. They might have bank statements and 1099 forms, but no pay stubs or W-2s. That makes it harder for these workers to qualify for a regular home loan.

This is where the bank statement loan comes into the picture. With this type of alternative financing, California freelance workers, contractors, and gig economy employees can get around the traditional requirements imposed by banks.

Bank Statement Loans to the Rescue

A “bank statement loan” is a home mortgage loan that allows you to qualify for financing based on your most recent bank statements, instead of tax returns or W-2 forms. These loans create a kind of “side road” to mortgage financing for borrowers who might not qualify for a regular home loan due to their employment status.

In California, bank statement loans are often used by 1099 employees who do not have a regular / traditional income stream. This can include the following types of individuals:

• Small business owners
• Freelance workers
• Independent contractors
• Consultants
• Sole proprietor
• Gig economy workers
• Real estate professionals
• And more…

In short, anyone who needs an alternative income verification option to buy a home could benefit from using a bank statement loan. Borrowers who cannot verify their income in the traditional way, with the W-2 form, might want to consider using the bank statement loan. And that includes gig economy workers and freelancers.

How Much Can You Borrow?

The amount you’re able to borrow will depend on the amount of money you’re earning, the same as a regular mortgage loan. But the difference here has to do with the income verification process.

When we provide bank statement loans to California freelance or gig workers, we usually review 12 to 24 months of bank statements. This helps us determine how much a person can borrow, based on their month-to-month earnings.

When you get down to it, the approval process for traditional mortgages and bank statement home loans are basically the same. In both cases, the lender uses a variety of documents to analyze the borrower’s income, and then makes a lending decision based on that analysis. The difference lies within the specific documents being used.

Ready to Explore Your Options?

California freelancers and gig workers who want to buy a home have several non-traditional and alternative mortgage options to choose from. In many cases, the bank statement loan is the financing “tool of choice” for these types of borrowers.

But is it right for you? Bridgepoint Funding can help you decide.

Based in the San Francisco Bay Area, we serve home buyers and homeowners all across the Golden State. Our business model allows us to offer a wide range of mortgage options to our clients, and that includes bank statement loans. We also provide traditional mortgage financing, including FHA, VA and conventional loans.

Please contact our staff if you have questions about buying a home with a freelance or gig economy income. We look forward to helping you!