It’s true. “Traditional” nine-to-five jobs are no longer the only path to financial security and workers are embracing the idea of temporary, flexible, and on-demand work. Companies like Lyft, Uber, and TaskRabbit allow many to no longer be bound by the contracts of traditional employment – often referred to as the ‘gig economy’. While the traditional notions of employment may be redefining – it’s important to know what kind of impact these changes can have on your buying power when shopping for a home.

In the ever-evolving landscape of employment, the mortgage industry faces some new challenges in assessing the creditworthiness of individuals with these gig economy jobs. One of the mortgage lending roles most affected by these changes is the underwriter. For those that need a quick recap, remember that the underwriter is responsible for assessing and evaluating risks associated with your loan, often thought of as the person with the final word. After reviewing your financial information, it is the underwriter who has the discretion to decide if your application meets government standards – and will either approve or decline the application. For this reason, underwriters play a pivotal role in evaluating the unique circumstances and income streams of gig workers. 

Many gig workers may now be asking, “Well, what does an underwriter look for and how can I ensure that my loan is approved?”

To assess the creditworthiness of gig workers, underwriters may consider many factors. First, they will evaluate your earnings history, analyzing income patterns over an extended period of time. Underwriters want to see the consistency and reliability of income, with uninterrupted self-employment income for at least two years. If your income was interrupted, that is okay, and the underwriter will request additional documentation to gain a better understanding of your income stability and potential. Their decision should be favorable as long as you’ve remained in the same line of work, your annual income has remained the same or increased, and there are no large gaps in your employment history. (Note: Underwriters and lenders may accept a minor decline in income from one year to the next, however, they will calculate your qualifying amount by averaging your income over a two-year period.) 

Many gig workers also receive additional income, such as from overtime, commissions, and even part time second jobs, that can significantly impact a borrower’s ability to meet mortgage obligations. For those that have additional income, underwriters typically will take into account these key considerations:

• Consistency – Has the borrower received the form of income (i.e. overtime, commission) consistently over the past two years?
• Documentation – Can the borrower provide documentation to verify the form of income?
• History and Trends – Does the borrower’s employment history and industry trends determine the likelihood of continuing this form of income?

Ultimately, it’s important to note that an underwriter’s main objective is to assess your stability, consistency, and reliability – to ensure that you are able to pay your mortgage loan. If you’re enjoying the perks of the gig economy, such as being your own boss and setting your own schedule, just keep these factors in mind to prepare for your home-buying journey.

If you have questions about how your unique income situation may impact your ability to qualify for a mortgage, a trusted loan officer from our team is here to help guide you through the process.

Need to get connected to a Mortgage Loan Professional? Call us anytime, evenings and weekends included, at (303) 394-2121.