Self-Employed Clients? Loan Approval Chances Just Got Better
April 4, 2019
The two largest sources of mortgage money in the United States want self-employed loan shoppers to know that their chances of getting a home loan approved have increased.
Fannie Mae and Freddie Mac have rolled out automated underwriting technology for lenders that take a lot of the guesswork and risk out of the approval process for mortgage applications of the self-employed.
One of the reasons lenders have been reluctant to approve loans if you’re self-employed is because it’s expensive, time-consuming, and labor-intensive to gather and analyze the paperwork needed to verify your income and gauge your risk. It’s much easier and profitable to process applications of wage or salaried employees who get a W-2 issued by their employer.
But this new technology, incorporated into the companies’ automated underwriting systems, enables lenders to analyze the paperwork quickly and accurately so they can come to a decision in a fraction of the time it used to take and with far less speculation involved.
The process potentially increases efficiency so much that even small community banks in rural areas can find it cost-effective to consider loan applications that before they might have passed on.
No process is perfect and there’s bound to be problems as glitches are worked out, but the new procedures show Fannie and Freddie are trying to remove some of the friction self-employed homebuyers face.
The new underwriting is a top story in the latest Voice for Real Estate news video from NAR.
Updated: May 28, 2020