The majority of people have some experience in the “gig economy,” but many have made it their livelihood. If you make all or most of your income through rideshare, freelance, or app-based services, you’re likely wondering if this type of income can be used to obtain a home. While it may be more difficult than it would be with a salaried position, obtaining a mortgage with a gig economy job is not impossible.
Most mortgage lenders will verify your income to determine how much mortgage you can afford, but if it can’t be documented (or if it is documented in an unusual way), you might run into trouble. However, large mortgage financiers like Fannie Mae and Freddie Mac are already discussing options and beginning to take action for gig economy-reliant individuals. This means it should be easier for you to get a mortgage, even if the process is not yet completely clear. To that end, the cooling mortgage market may result in a more expeditious effort to get more customers in the door, meaning this process is likely to speed up.
Freddie Mac recently predicted that 43% of U.S. workers will be freelancers by 2020—up from just 6% in 1989. These positions are, essentially, jobs that allow the individual to put in the hours and time they can. The workforce behind companies like Uber, Lyft, and Postmates choose the hours they work to perform deliveries and driving-oriented tasks, while those who use Airbnb or Turo rent out their homes and belongings to others to turn a profit.
While many Americans have experience in this economy, most use it to supplement their existing income. Some also use it to meet a specific goal, such as saving for a down payment on a home or to qualify for a mortgage. While this provides an essential income boost for most, it introduces ambiguity to financial health; in the past, income was fairly straightforward, which allowed mortgage lenders to easily assess a person’s income and debt-to-income ratio. The gig economy is fluid, which inhibits the lender’s ability to make a sound assessment.
So, what is the solution? We don’t yet have one, but it will likely have to do with technology. We anticipate that mortgage providers will begin to develop a calculator to facilitate the process of better understanding gig economy income. Freddie Mac has already teamed up with a company called LoanBeam to use a patented technology called optical character recognition. This program scans and extracts key information directly from a prospective borrower’s financial documents to calculate a qualifying income that can be used to obtain a home loan. Currently, this process is manually performed, which can lead to extended application times and miscalculations.
The gig economy is not going away, and more workers will begin to rely on its flexibility to supplement their income. Technology will need to catch up to the market, but we don’t see that process taking too long.