The two largest sources of mortgage money in the United States want self-employed loan shoppers to know that their chances of getting a home loan approved have increased.
Fannie Mae and Freddie Mac rolled out automated underwriting technology changes for lenders that take a lot of the guesswork and risk out of the approval process when the self-employed apply for a mortgage loan.
Lenders have been reluctant to approve loans for the self-employed because, in part, it’s expensive, time-consuming and labor-intensive to gather and analyze the paperwork needed to verify income and gauge risk. It’s much easier and profitable for them to process applications from wage or salaried employees who get a W-2 issued by their employer.
But this new technology, incorporated into the companies’ automated underwriting systems, enables lenders to analyze a self-employed applicant’s paperwork quickly and accurately, and they can come to a decision in a fraction of the time it used to take – and with far less speculation involved.
The process potentially increases efficiency so much that even small community banks in rural areas can find it cost-effective to consider loan applications that they might have passed on before.
Source: Fannie Mae and Freddie Mac
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