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A bill introduced into Congress makes it easier for self-employed to qualify for mortgage loans by using alternative income-verification documents. This article will explain more.
Self-employed home buyers in Washington and Oregon (our primary service area) may have an easier time qualifying for mortgage loans. A Senate bill introduced last month is designed to improve mortgage access for self-employed and “gig economy” workers.
Essentially, it would allow banks and mortgage lenders to use alternate forms of documentation besides the traditional W-2 form, when verifying income.
In August 2018, U.S. Senators Mark R. Warner (D-VA) and Mike Rounds (R-SD) introduced a new piece of legislation that aims to expand access to mortgage loans for the self-employed and “other creditworthy individuals with non-traditional forms of income.” The legislation, formally known as the Self-Employed Mortgage Access Act, gives lenders additional methods for verifying income.
According to Senator Warner, a lot of creditworthy individuals these days are finding it hard to qualify for mortgage loans just because they are self-employed and lack the documents traditionally used for income verification.
“An increasing number of Americans make their living through alternative work arrangements, like gig work or self-employment,” Warner said. “Too many of these otherwise creditworthy individuals are being shut out of the mortgage market because they don’t have the same documentation of their income — paystubs or a W-2 — as someone who works 9-to-5.”
The Self-Employed Mortgage Access Act would allow self-employed borrowers in Washington, Oregon and nationwide to supply alternate forms of paperwork to prove their income. It would also include various forms of consumer protection.
So there seems to be an alternate form of income documentation for almost any type of self-employed or gig worker.
Related: Getting a mortgage when self-employed
The recently introduced bill has garnered support from a variety of individuals and groups, ranging from housing and economic “think tanks” to mortgage industry groups.
Bill Killmer, SVP of Legislative and Political Affairs for the Mortgage Bankers Association, said the industry group strongly supports the legislation:
“We believe consumers who own small businesses or are otherwise self-employed should not face unnecessary obstacles to homeownership,” Killmer said. “By allowing the use of standards already in place at FHA, VA, USDA, Fannie Mae, and Freddie Mac, this legislation better ensures that all consumers are treated on a level playing field…”
This latest development is part of the ongoing evolution of the mortgage industry. Over the last few years, a number of new programs and policy changes have made it generally easier for creditworthy home buyers to obtain financing.
If you’re self-employed, odds are you may not have the documentation needed to qualify for a traditional mortgage, like W-2s or standard tax returns. Even if you’re financially stable and can easily afford a mortgage, being unable to accurately demonstrate your income the conventional way can get in the way of obtaining mortgage financing.
In this case, other loan options are available to help pave the way to homeownership. Here are a few mortgage programs available to self-employed borrowers and others who need different ways to show their financial standing:
| Bank Statement Loans | Bank statement loans allow self-employed individuals to qualify for financing using their bank statements instead of traditional income verification. |
| 1099-Only Loans | 1099-only loans are designed for independent contractors and freelancers who receive income reported via 1099 forms. |
| Profit & Loss (P&L) Only Loans | Profit & Loss (P&L) only loans utilize a borrower’s business financial statements to assess income for loan qualification. |
| Asset-Based Loans | Asset-based loans are secured by the borrower’s assets, such as real estate or investments, rather than solely on income or credit. |
| DSCR Loans | DSCR loans evaluate a property’s income relative to its debt payments, primarily used for investment properties. |
| Non-QM Investor Loans | Non-QM investor loans provide financing options for real estate investors who do not meet traditional qualifying criteria. |
Are you a self-employed worker in Washington or Oregon? Do you need mortgage financing to complete a home purchase? We would love to help. Sammamish Mortgage has been providing mortgage programs to borrowers in Washington, Oregon, California, Colorado, and Idaho since 1992. Please contact us with any financing-related questions you have, or visit our website to get an instant rate quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
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