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Home Mortgage for Self-Employed Americans Becomes Easier
Home mortgage for self-employed Americans and contract workers are struggling to qualify for a mortgage. They are struggling more compared to those with W-2 forms or pay stubs where lenders can use to verify their incomes. However, for the self-employed, the mortgage process is time-consuming and cumbersome. Lenders often require extra paperwork, such as full documentation of tax returns from the last couple of years. Even after that, the person may still lack an income steady enough to qualify or face extra fees once they are approved.
Automated System for Mortgage Qualification
Mortgage financing giants Freddie Mac and Fannie Mae have recently made changes to an automated system that could help more self-employed individuals qualify for a mortgage. With this new technology it can automate underwriting for loan applicants who are self-employed or have side income.
“Previously it took a long time to process applications including to analyze and verify, but now it takes just minutes. Thanks to the use of optical character recognition technology that reads tax returns identifies what qualifies as eligible income. It then integrates it into both companies’ electronic underwriting systems,” according to The Washington Post.
This frees lenders from having to comb through tax documents and allows them to find the information they need in minutes. The new system now takes three to five days to process, which slashes hundreds of dollars in costs and trims the risk for the lender.
Ten Percent of Workforce Are Self-Employed
There were about 15 million self-employed individuals according to the U.S. Bureau of Labor Statistics. Adding automation to the mortgage approval process could give potential home buyers greater confidence as they shop for a home, says Silverton Home Mortgage. This also could help with meeting contingency-clause financing deadlines in contracts.
Still, the programs are new, so not all lenders may offer this automated income verification to self-employed applicants yet. But housing experts say it may be valuable to self-employed individuals to find those that do.
Are you self-employed and need help with home mortgage to buy your next home?