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Bill Would Boost Mortgage Access for Self-Employed in Washington & Oregon

Senate bill would make it easier for self-employed to qualify for mortgage loans by using alternative income-verification documents.

Self-employed home buyers in Washington and Oregon (our primary service area) could soon 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.

Better Mortgage Access for ‘Gig Economy’ and Self-Employed Workers

In August 2018, U.S. Senators Mark R. Warner (D-VA) and Mike Rounds (R-SD) introduced a new piece of legislation that could 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, would give 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.

If the bill passes, the following documents would be acceptable for mortgage underwriting:

  • IRS Form 1040 Schedule C for sole proprietorships
  • IRS Form 1040 Schedule F for farming workers
  • IRS Form 1065 Schedule K-1 for partnerships
  • IRS Form 1120-S for S Corporations

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

View Mortgage Rates Jul, 20, Sat, 2019

Bill Enjoys Broad Support from Many Groups

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.

Like all major legislation, this bill would have to clear the Senate and the House, and then be signed into law by the president. So it has a ways to go. But it seems to be enjoying broad and vocal support in its current form. We will continue to monitor the status of this legislation and provide updates when new information becomes available.

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Have questions? Are you a self-employed worker in Washington or Oregon? Do you need mortgage financing to complete a home purchase? Please contact us with any financing-related questions you have, so we can assist you.

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