The Self-Employed Mortgage Access Act: What you need to know

November 12, 2018

The ranks of self-employed individuals are growing, leading to a greater awareness of the financial challenges facing people who are their own bosses. While companies that take advantage of "gig" hiring models, such as ride-sharing services, presented as a new business paradigm, they are putting professionals into the age-old categories of independent contractors and freelancers. 

It's important for people leaving full-time employment for one or more freelance jobs to understand what their financial options are. As it stands now, some common processes, such as receivng a home loan, are more complicated for independent businesspeople. Fortunately, lawmakers have noticed this plight and there is a bipartisan effort to make lending to self-employed individuals easier.

The Self-Employed Mortgage Access Act

How are legislators dealing with the increasing number of Americans receiving their income through nontraditional pay structures? According to The Washington Post, Senators Mark Warner of Virginia and Mike Rounds of South Dakota took action in early September to allow more permissible types of financial disclosure when potential borrowers are proving their income for home loan approval.

The senators' bill, called the Self-Employed Mortgage Access Act, is based on helping independent contractors receive qualified mortgages. Yes-or-no approval decisions aren't the only factor affected by the bill. If passed, the act would also make it easier for lenders to prove they deserve favorable interest rates.

The payment documents typically used to determine readiness for qualified mortgages include W-2 tax forms and pay stubs. Independent and freelance work may leave employees without these markers of income. Sen. Warner explained that around 30 percent of the U.S. workforce fall into nontraditional payment patterns, according to the Post.

Housingwire reported that Sen. Rounds envisions the new act benefiting the entrepreneurial workforce as well as farmers and general small-business owners. Lenders assessing applicants for home loans will be able to assess finances more flexibly. The Mortgage Bankers Association has also come out in support of the bill, describing the legislation as "common sense" and adding that it uses established, existing underwriting standards. Rather than reinventing the income assessment process, the act would simply expand its parameters.

Getting a Mortgage while Self-Employed

While the topic of self-employed mortgage approval is being debated on Capitol Hill, we have already considered the needs and requirements of self-employed borrowers with our SmartSelf mortgage offering. This non-qualified offering was designed as a smart alternative for individuals who draw their income from sources other than a weekly or monthly paycheck.

SmartSelf qualification is based on business or personal bank statements, from either a year or 24 months. These statements act as the proof that a potential borrower is ready to buy or refinance a home or investment property. The loans are appropriate for first-time homebuyers and experienced, longtime owners alike.

As a member of the self-employed workforce or freelance-based gig economy, you're part of a defining trend in modern labor. When it's time to buy or refinance a home, your membership in this group shouldn't be the factor that determines whether or not you have an easy time getting approved. Lawmakers have your needs in mind - and so do we.

Source: The Washington Post