‍

If you’re one of the millions of Americans who are self-employed or earn money on the side through freelance, contract or “gig” work, you may know the drill firsthand: Applying for a mortgage can be an intrusive ordeal.

‍

But major improvements are underway: As of last week, the two largest sources of mortgage money in the United States — investors Freddie Mac and Fannie Mae — have deployed remarkable new technology that automates underwriting for applicants who are self-employed or have significant side income.

‍

Applications that previously would have taken days to analyze and verify may now take just minutes, thanks to the use of “optical character recognition” (OCR) technology that reads tax returns, identifies what qualifies as eligible income and integrates it into both companies’ electronic underwriting systems.

‍

Instead of an underwriter having to plow through wads of tax documents, lenders can now scan and analyze the paperwork within minutes, saving time and money for borrowers and lenders alike.

‍

The new system takes three to five days out of the process, can cut hundreds of dollars in costs, and slashes risk for the lender.

‍

The move to automation could have wide effects. In 2016, the Bureau of Labor Statistics reported that there were about 15 million self-employed individuals in 2015, one of every 10 people in the workforce. A tax-preparation industry estimate indicated that more than one-third of workers earned income from “gig-economy” sources in 2015 — such as driving for Lyft or renting out a house via Airbnb — and that the total will exceed 40 percent by 2020.

‍

Lenders say the automation improvements could have benefits for home buyers, sellers, and realty agents that may not be immediately obvious.

‍

Having absolute certainty about income eligibility up front should give buyers greater confidence as they shop for a home. And it could help dramatically in meeting contingency-clause financing deadlines in contracts, eliminating situations where underwriters are still struggling with verifying income days or hours before a contingency expires.

‍

Bottom line: If you’re self-employed or have gig income, be aware of the changes. Since the programs are new, not all lenders may offer streamlined income verification yet, but if they’re on the ball, they soon will.

Source: Kenneth R. Harney washingtonpost.com