Lenders Wary of Self-Employed Borrowers

Despite appearing in a better position to repay their home loan, self-employed borrowers receive 40 percent fewer loan quotes, primarily because of their typically lower credit scores.

When it comes to getting a home loan, self-employed borrowers are less likely to get quotes than other borrowers — even though they say they make more and have more cash on hand for down payments, according to a Zillow Mortgages analysis.

The likely reason? Self-employed borrowers typically have lower credit scores. They are twice as likely as other borrowers to report a score of less than 680.

Zillow was able to analyze millions of loan requests from Zillow Mortgages, and found that self-employed borrowers got 40 percent fewer loan quotes from lenders than other borrowers.

“Self-employed borrowers will no doubt face headwinds when trying to get a loan,” said Zillow Vice President of Mortgages Erin Lantz.  “Low credit scores, coupled with a mountain of paperwork lenders must complete specifically for self-employed borrowers, make them unattractive.”

Self-employed borrowers report that they make 81 percent more money than other potential borrowers, and their incomes are on the rise. Income for self-employed borrowers is up 28 percent since mid-2012, while other borrowers’ incomes are down an average of 17 percent.  Self-employed borrowers seek 12 percent higher home loans with larger-then-average down payments.




Realtor with Greg Garrett Realty, actively licensed in the state of Virginia

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