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Self-employed? You Have a New Friend When Applying for a Home Loan

Self-employed? You Have a New Friend When Applying for a Home Loan


The two largest sources of mortgage money in the United States want you to know your chances of getting approved for a home loan if you’re self-employed has just gotten a lot better.

Fannie Mae and Freddie Mac have rolled out new 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 they need to verify your income and gauge your risk. It’s just so much easier and profitable if you’re a wage or salary employee who gets a w2 issued by an employer.

But the 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 guesswork 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. Also covered is NAR’s report that finds staging leads to faster sales and can help get higher prices.

The video also excerpts from the testimony of three Realtors® who went before Congress in the last couple of weeks to give their views on data privacy, mortgage market reform, and flood insurance. Realtors® are in a good position to talk about data privacy because their business depends in part on their ability to take care of their customers’ data. At the same time, though, they’re mostly small businesses with limited resources to invest in elaborate data security processes. What’s needed is strong, consistent standards that everybody—including the big data firms that Realtors® typically work with—must follow.

On mortgage reform, NAR President-elect Vince Malta said the federal government must continue to back conforming conventional loans after Fannie Mae and Freddie Mac are taken out from under government control. And on flood insurance, a Realtor® reminded lawmakers that half of flood insurance claims come from inland areas. That’s an important message, because flood insurance is perceived to be a coastal issue.

Access and share the video.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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