Being self-employed can be incredibly rewarding, but it can also be stressful. You have to be self motivated, manage your time efficiently, keep clients happy, and pay self-employment tax. On top of that, you don’t have a boss to generate income statements for you, and historically, that has made it hard for some self-employed people to get mortgages.
Luckily, that has changed. New rules are making it easier than ever to get a self-employment loan to buy a home. Here’s what you need to know:
Some Lenders Found Self-Employment Loans Too Difficult
In the past, many lenders shied away from self-employed borrowers because it was hard to assess their income. When lenders worked with employed people, they just needed to look at a W-2 form, and to get a sense of whether or not the borrower will be likely to stay current on the mortgage in the future, they also take into account how long the borrower has had their job or been in that industry.
However, with self-employed people, lenders had to look at a lot more information. They typically had to assess profit-and-loss statements, tax returns, accounting records, and other documents. Then, they had to take into account whether or not the individual’s self-employment income was likely to continue. This process was time consuming, and as a result, many borrowers refused to offer a self-employment loan.
New Technology Improves Processing for Self-Employment Loans
Luckily, now, new technology is changing old patterns. Fannie Mae and Freddie Mac are the entities who own most of the country’s mortgages held by middle and low-income homeowners. Essentially, banks, co-ops, or other mortgage lenders review the application and decide whether or not to grant the borrower a loan. Then, these entities purchase the loan as long as it conforms to certain standards.
Recently, Fannie Mae and Freddie Mac rolled out software that can quickly assess documents presented by self-employed people. These tools make it easier than ever for underwriters to make a decision on whether or not to offer a mortgage to a self-employed person. As a result, more and more lenders are likely to start offering a self-employment loan to people who want mortgages.
You Can Apply for a Self-Employment Loan Now
If you’re self-employed, the new technology is good news. You may be more likely to get a loan. You may qualify for a loan with a lower down payment than you could get on your own, or you may even qualify for a larger amount.
Thanks to the new technology, self-employed people have more choices than ever. Curious about getting a self-employment loan? Learn more about our Income Express loan product. Want to apply for a mortgage today? Contact us here!
At Bright Path Brilliant Mortgage solutions, we offer a vast array of mortgages for people in all kinds of financial situations with a range of employment realities. We look forward to helping you get into your dream home.