Stated Income Loans for Self-Employed Borrowers in Los Angeles County: What You Need to Know
You run your own business. You make good money. But when you sat down with a traditional lender and handed over your tax returns, they looked at your net income — after all the deductions your accountant worked hard to find — and told you that you don’t qualify for the home you can clearly afford.
This is one of the most frustrating situations I see, and it’s incredibly common among self-employed borrowers, 1099 contractors, and small business owners throughout Los Angeles County.
The good news: there are loan programs built specifically for people in your situation. They’re called Stated Income loans — also known as bank statement loans or non-QM loans — and they work very differently from conventional or FHA financing.
Why Traditional Loans Don’t Work for Many Self-Employed Borrowers
Conventional and FHA loans use your tax returns to verify income. For W-2 employees, that’s straightforward. For self-employed borrowers, it creates a problem.
If you’ve done everything right from a tax perspective — maximizing deductions, running expenses through the business, depreciating assets — your taxable income on paper is often a fraction of what you actually earn and spend. A lender looking at your Schedule C or your K-1 may see $60,000 in net income when your business is actually generating $200,000 or more in revenue.
That gap is why so many self-employed buyers in LA get turned down by banks, even when they have strong savings, excellent credit, and a business that’s been running for years.
What Is a Stated Income Loan?
A Stated Income loan — more accurately called a bank statement loan in today’s market — allows lenders to qualify you based on your actual cash flow rather than your taxable income.
Instead of two years of tax returns, you provide:
- 12 or 24 months of personal or business bank statements
- The lender calculates your average monthly deposits to determine qualifying income
- Business expenses are factored in at a standard ratio (typically 50% for sole proprietors, though this varies)
The result: your qualifying income reflects what’s actually moving through your accounts — not what’s left after your CPA does their job.
Who Uses Stated Income Loans in LA County?
In Los Angeles County, I work with a wide range of self-employed borrowers who use bank statement and non-QM programs:
- Freelancers and creatives — writers, directors, editors, photographers, music producers in Hollywood, Silver Lake, Culver City, and the broader entertainment corridor
- Independent contractors and consultants — tech, marketing, legal, and finance professionals working 1099 across West LA, Downtown LA, and the South Bay
- Restaurant and retail owners — operators in communities throughout the county running businesses with strong revenue but heavy write-offs
- Real estate investors and agents — professionals whose income is commission-based or comes from multiple rental properties
- Tradespeople and contractors — plumbers, electricians, general contractors running their own shops across the county
If you’ve been self-employed for at least 12–24 months and your bank statements show consistent cash flow, you’re likely a strong candidate.
How the Qualification Works
Here’s a simplified version of how I run the numbers for a self-employed borrower:
Personal bank statements (12 months):
Total deposits ÷ 12 = average monthly income
Business bank statements (12 months):
Total deposits × expense factor (typically 50%) ÷ 12 = average monthly income
The lender then uses that monthly income figure to calculate your debt-to-income ratio — the same way they would for a W-2 borrower, just with a different income source document.
Most bank statement programs allow DTIs up to 50%, and some non-QM products go higher with compensating factors like strong reserves or a large down payment.
What Are the Tradeoffs?
Stated Income and bank statement loans are not identical to conventional financing. Here’s what to expect:
Higher interest rates. Because these are non-QM products — outside the Fannie Mae/Freddie Mac system — rates typically run 0.5% to 1.5% higher than conventional rates, depending on your credit score, LTV, and loan size.
Larger down payment requirements. Most programs start at 10% down, with better pricing at 20%–25% down. Zero-down is not available on non-QM products.
Credit score matters more. Non-QM lenders still pull credit. A score of 680 or higher gets you into more programs at better rates. Some products go down to 620, but pricing tightens significantly.
Reserve requirements. Many programs require 6–12 months of PITI (principal, interest, taxes, insurance) in liquid reserves after closing. This is actually a place where many of my self-employed clients do very well — they often have strong savings or business accounts.
Stated Income Loan Scenarios I See in LA County
Scenario 1: Studio City film producer
12 months of personal bank statements show $30,000/month in average deposits. Tax returns show $85,000 in net income. Bank statement program qualifies on the $30K figure — unlocking a purchase in the $900,000–$1,100,000 range instead of a price point that reflects the tax return income.
Scenario 2: Boyle Heights contractor
General contractor running his own business for 8 years. Business bank statements average $45,000/month in deposits. After a 50% expense factor, qualifying income is $22,500/month — enough to support a purchase in the $700,000–$800,000 range with 20% down.
Scenario 3: South Bay 1099 tech consultant
Earns $180,000/year on 1099 contracts with no employees and significant deductions. Conventional lenders see $80,000 on the Schedule C. Bank statement program qualifies on 24-month average deposits — qualifying income closer to $140,000.
Common Questions From Self-Employed LA Buyers
Do I need two years of self-employment history?
Most programs want at least 24 months of self-employment, verified through a business license, CPA letter, or similar documentation. Some programs accept 12 months in specific circumstances.
Can I use a mix of personal and business bank statements?
Yes — some programs allow blended analysis. This can be useful if deposits flow through both accounts depending on the client or project.
Will I need an appraisal?
Yes. Bank statement loans still require a full appraisal. The property has to support the value, the same as any other loan.
Can I refinance into a conventional loan later?
Yes, and many borrowers do. Once your tax returns catch up — if you choose to show more income or your business structure changes — refinancing out of non-QM into a conventional loan at a better rate is a common strategy.
What if I just started my business in the last 12 months?
Non-QM programs typically require at least 12 months of self-employment, though some products want 24. If you’re under 12 months, we’d explore other options depending on your situation.
The Bottom Line for LA County Self-Employed Buyers
If a conventional lender has told you that you don’t qualify, it doesn’t mean you can’t buy — it means you need a lender who works with non-QM products and knows how to structure your file correctly.
I’ve been doing this since 2005. I know which programs work for which borrower profiles, and I know how to get a self-employed buyer from “turned down” to “in escrow” without asking you to undo all the tax planning your accountant has done.
If you’re self-employed, working 1099, or running a business anywhere in Los Angeles County and you want to know whether a bank statement loan can get you into a home — let’s talk.
Adam Tice
Senior Loan Officer, Mark 1 Mortgage — Team Tice
NMLS #289398
📞 626-825-2326
✉️ adam@adamtice.com
🌐 adamtice.com
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