Self-employed and freelance workers should find it easier to apply for a mortgage thanks to a newly automated system created by Fannie Mae and Freddie Mac.
Previously, many self-employed and freelance workers have struggled to qualify for a mortgage, as they need to provide a ton of additional paperwork to prove their incomes. The process is much more complex than it is for workers who can use pay stubs or W-2 forms to show how much money they’re making. For example, lenders will often demand full documentation of tax returns for the last two years.
Moreover, self-employed and freelance workers often face extra fees with their applications.
But Fannie and Freddie’s new system should change all that, as it relies on technology that automates the underwriting process for such loan applicants.
“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, Kenneth Harney reported for the Washington Post.
The system means that lenders don’t need to have someone comb through an applicant’s tax documents manually, saving hours of time. With it, loan applications should take just three to five days to process. This would also reduce the costs of an application, and remove risk for lenders, said Freddie Mac’s senior vice president Andy Higginbotham.
There should certainly be lots of demand for the new system, as the number of self-employed workers in the US tops 15 million according to data from the Bureau of Labor Statistics.
The new system has only just been announced, so not all lenders will be able to offer this automated income verification to self-employed applicants yet. But housing experts say it may be worthwhile for self-employed individuals to find a lender that does.