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Private Hard Money Lending explained. The first in a series of short videos about hard money investing, borrowing and brokering from Trent ...

Bill would aid mortgage applicants who rely on the gig economy for earnings

Here’s some promising news for self-employed entrepreneurs, “gig-economy” workers and small-business owners: There’s a bipartisan push underway on Capitol Hill to make the home-mortgage process a lot easier for you.

For years, federal lending rules have favored applicants with easily documentable incomes — people who can show underwriters pay stubs, W-2s and two years of steady income plus the likelihood that it will continue. The same rules have made it challenging for people who work for themselves, earn money at multiple jobs or have big seasonal swings in what they earn.

Say you’re a Lyft driver and you run a cash-intensive food-truck business on the side. You earn good money and you have decent credit scores and savings, but your income jumps around from month to month depending on sales. You’re likely to have a hard time convincing lenders about your total income: It’s not steady, and at least some of it can be difficult to document. Your loan officer may end up saying, sorry, I can’t fit your income pattern into the boxes mandated by federal qualified-mortgage (QM) regulations, so I just can’t do your loan.

Hope is on the horizon for self-employed workers seeking mortgages

Enter the Self-Employed Mortgage Access Act, co-sponsored by Sen. Mark R. Warner , D-Va., and Sen. Mike Rounds, R-S.D. It would expand lenders' permissible sources to verify incomes beyond the relatively narrow range specified in current federal qualified-mortgage regulations. According to Warner, as many as 42 million Americans — roughly 30 percent of the workforce — are self-employed or in the gig economy.

"Too many of these otherwise creditworthy individuals are being shut out of the mortgage market because they don't have the same documentation of their income — pay stubs or W-2s — as someone who works 9 to 5," said Warner in introducing the bill.

Mortgage lenders say applications from buyers with nontraditional income patterns are a growing issue. “I deal with a lot of people who fall out of the guidelines," says Don Calcaterra Jr., owner of Local Lending Group in Troy, Mich. Calcaterra told me about a recent client who moved from being a W-2 employee to independent contractor status. She couldn't show two years of steady income in her current role, couldn't wait for two years to qualify to buy the house she needed, and ultimately couldn't fit into current federally prescribed income rules.