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Home Mortgage for Self-Employed Americans Becomes Easier
Home mortgage for self-employed Americans and freelance or contract workers have long had to struggle to qualify for a mortgage compared with those with W-2 forms or pay stubs that lenders can use to verify their incomes. For the self-employed, the mortgage process can be time-consuming and cumbersome. Lenders often require extra paperwork, such as full documentation of tax returns from the last couple of years (not just the electronic copy submitted to the IRS). Even after that, the person may still lack an income steady enough to qualify or face extra fees once they are approved.
However, 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. The new technology automates underwriting for loan applicants who are self-employed or have side income.
“Applications that previously would have taken days to analyze and verify may now take just minutes, thanks to the use of optical character recognition technology that reads tax returns, identifies what qualifies as eligible income, and integrates it into both companies’ electronic underwriting systems,” reports Kenneth Harney, a syndicated real estate columnist for 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, Andy Higginbotham, a Freddie Mac senior vice president, told The Washington Post.
There were about 15 million self-employed individuals in 2015—which equates to about one of every 10 people in the workforce, 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 Josh Moffitt, president of Silverton Home Mortgage in Atlanta. It 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.
Need help with home mortgage to buy your next home? Contact our real estate team at Monument Realty in San Ramon. We have home mortgage team that can help get you pre-qualified and ready for your home hunting.