Loosening lending standards are making it easier than ever for gig workers to finance homes.
These workers often make enough money to qualify for a loan, but often have a difficult time proving that to lenders.
“It is a phenomenon with this gig economy where people can drop in and have an Amazon play, and they’re pulling in $10,000 a month from it. So, these are not traditional type borrowers,” Eric Morgenson, VP of business development at Angel Oak, said on a panel discussing loans for gig workers.
Self-employed borrowers are typically asked for contract work 1099s, copies of the last 12 to 24 months of business and personal bank statements, and year-to-date profit-and-loss statements that report revenue, expenses, and net income. Keeping track of all of these documents can be difficult.
Tax deductions can also lower a borrower’s income reporting, making them more likely to qualify for a smaller loan.
“Self-employed borrowers with good to excellent credit, large down payments, and the income to afford a higher-priced home are oftentimes turned away from their bank or other financial institution simply because they can’t qualify using tax returns and that lender does not have another loan option to help them,” Mac Cregger, a senior vice president and regional manager at Angel Oak, told Business Insider.
Fannie Mae and Freddie Mac are notorious for tight underwriting standards. But in the wake of Covid, they have loosened these requirements. Earlier this year, they rescinded rules requiring self-employed borrowers to provide the profit-and-loss statement as well as their most recent two or three months of bank statements.
Removing these requirements makes it easier for all lenders to provide loan solutions for self-employed borrowers.
Leaders at Global Home Finance, a lender operating in Texas and Georgia, are reminding gig workers that many loan options they offer are now available that cater to unconventional income sources. Their NINJA home loan is specifically designed for gig workers and business owners.
“Gig workers include Uber and Lyft Drivers, delivery service drivers, independent contractors, temp workers, and anyone else who enters into an agreement to provide services on-demand,” Brad Cahoone, President of Global Home Finance, said in a statement.
Cahoone said gig workers are often paid in cash, don’t use banks, or forgo the services of an accountant to prepare important documents.
“We have multiple custom mortgage solutions including the NINJA home loan, which is specially designed for business owners and gig workers,” Cahoone said.
NINJA stands for “no income, no job, and assets.” It requires no income verification and is available in Texas and Georgia.
Follow Us On Twitter:
Read More Articles:
Loan Apps Turn Down Again As Rates Breach 6.5%
Luxury Home Sales See Biggest Dip Since 2012
Millennials Are Willing To Co-Buy In Order To Afford Their Dream Home
Are you offering unique options for buyers as the market normalizes? If so, let us know. Email Editor Kimberley Haas at [email protected].