Hello, LOs!
We've known for a while that self-employed borrowers have a much harder time getting a mortgage. Has it gotten better?
In January, LOs shared some of their horror stories. According to one LO, a borrower with a business that makes a quarter of a million dollars had to get his daughter to cosign for him on his house, and wondered, "Isn't my money green?"
Another LO said at the time that self-employed financing is a "nightmare," and described an arduous process of crafting a two-year plan for self-employed borrowers to qualify for a mortgage, hopefully, maybe, at some future point.
Much of this is because of underwriting requirements put into place by the GSEs about a year ago, restrictions that haven't changed much. Lenders, though, are making more of an effort to reach self-employed borrowers, LOs told HousingWire.
Still, one LO said that the changes haven't amounted to much — even if lenders are marketing more to self-employed borrowers, the underwriting has still not caught up.
"Mortgage brokers are frustrated because they can't get loans approved according to their marketing," said one LO. "They are marketing it as having changed some guidelines, but they are still underwriting to old guidelines."
For other employees without a W-2, like Uber drivers, the situation hasn't improved at all.
"I still find that it's much more difficult than it should be for a 1099 employee," said one LO. "It seems a little excessive for an Uber driver to have to fill out a P&L statement."
Lenders, it turns out, still view borrowers without a W-2 as inherently riskier, even though annual incomes are higher for self-employed households than for salaried workers.
In the years leading up to the Great Financial Crisis, self-employed and W-2 borrowers took out mortgages at about the same rate. In the years since, however, self-employed borrowers have increasingly turned away from mortgages.
About 10% of US households are self-employed.
Those borrowers face extra hurdles because, unlike salaried workers, they don't have pay stubs or W-2 wage statements. Instead, they have to submit a profit and loss statement, which provides a snapshot of revenues, costs and expenses during a specific period of time.
How is the housing market meeting the needs of gig workers and other unsalaried workers who seek mortgage financing? Tell me all about it, at gkromrei@housingwire.com
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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