Mortgages and The Self-Employed
Loan Origination Solutions for Self-Employed Consumers.
As origination forecasts climb and interest rates remain low, self-employed borrowers continue to face roadblocks when qualifying for a mortgage.
According to a Zillow study quoted in Forbes Magazine this month, self-employed consumers receive 40% fewer loan quotes than W-2 consumers. Self-employed borrowers made 81% more money than other potential borrowers and seek home loans that are 12% higher with higher down payments. But, for the 14 million US self-employed consumers there are considerable risks for mortgage underwriters to clear prior to closing. Self-employed borrowers tend to have lower risk scores (FICO). In a late 2014 Zillow study, self-employed borrowers were almost twice as likely to have a FICO score below 680 than their W-2 counterparts. Loan officers are forced to work with self-employed borrowers to help them raise their scores with tools such as CreditXpert available through NCS. Underwriters must collect additional verifications and documentation over and above W-2 wage earners, such as K-1s to show an ownership percentage in the business. With greater conditions to clear, loans on self-employed borrowers take longer to close due to the time to complete and collect those added verifications and documentation.
NCS’ independent verification suite is an important tool kit for underwriters and production teams looking for quicker and easier verifications and analysis. An example is NCS’ FACTCheck solution. IRS sourced tax transcript data automatically populates a Microsoft Excel cash flow analysis template. Calculations are completed in seconds, and underwriters are able to notate missing tax return data or upload copies of the consumer’s tax returns for entry into the FACTCheck report. It’s an extreme time savings. Additionally, FACTCheck reduces the opportunities for mis-keyed data and aids in the determination of ability to repay.