New options for lenders include a web-based calculator and partnerships with technology providers
Fannie Mae now offers multiple ways to use its Income Calculator – enhanced to support lenders and loan originators working with self-employed mortgage applicants who lack traditional sources of income.
The tool, now available on Fannie’s website, enables lenders and loan originators to verify income at no additional cost. This addresses a common challenge in the mortgage process for those without traditional W-2 employment.
Self-employed individuals represent about 10% of the US workforce and a growing segment of Fannie Mae loan deliveries. However, calculating their income based on tax returns can be more complex and prone to errors, often leading to loan delays and defects.
The Income Calculator uses tax return data to calculate monthly income based on current Selling Guide requirements before loan case file submission. It provides the qualifying income amount along with actionable messages to help avoid common errors.
Read next: How to get a mortgage for self-employed clients
“Whether through our new web-based user interface or through an integrated technology service provider, Fannie Mae’s Income Calculator simplifies the process of underwriting the qualifying income of self-employed borrowers, which traditionally has been a challenging and time-consuming operation for lenders,” Mark Fisher, vice president of single-family credit risk solutions, said in a media release.
Lenders can utilize the free web-based interface directly on Fannie Mae’s website for manual calculations. Or, they can partner with an authorized technology provider to completely automate income verification within their existing underwriting systems. More integrations with providers are expected soon.
“With the launch of our new web interface, originators now can select the solution that best aligns with their processes and meets their needs while saving time and improving certainty in the quality of the loan,” Fisher added.
In addition to the Income Calculator, Fannie Mae has been innovating with recent enhancements such as the DU validation service, which now allows for automatic validation of borrower assets, income, and employment using a single asset report.
The government-sponsored enterprise also aims to improve the pre-qualification experience with enhancements that help lenders assess homebuyer preparedness earlier in the process without affecting the consumer’s credit score.
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