COVID-19 And Your Self-Employed ClientsCOVID-19 has impacted every American life in one way or another, and you may have already seen its effect on many of your clients. One of the hardest hit groups of people you may work with is the self-employed.
How Has COVID-19 Impacted Self-Employed Clients?Self-employed workers are those who work for themselves as their own boss. They may be freelancers, gig workers or business owners.
With people leery to participate in ride shares, for example, and businesses temporarily closing, opening at half capacity or cutting budgets on freelance work, many self-employed people have experienced job loss, cut hours or lower pay. Some have lost their businesses entirely.
According to the U.S. Bureau of Labor Statistics, “about 27 percent of the self-employed in July were unable to work because of the pandemic, compared with 11 percent of private wage and salary workers and 6 percent of government workers.”
Luckily, the CARES Act expanded unemployment benefits for self-employed people, a group who normally wouldn’t qualify for these programs. However, systems have been overwhelmed and receiving these benefits has been delayed, confusing and stressful.
How Does COVID-19 Change The Mortgage Process For Self-Employed Clients?Even before COVID-19, self-employed borrowers weren’t always seen as the “ideal” client due to more difficulty in qualifying them for a loan. Some may not have steady, verifiable income, nor a W-2 to prove it. Many self-employed individuals reduce their taxable income by writing off business expenses. This lower income may make lenders question whether they can afford a home in certain price ranges.
COVID-19 has only made it more difficult for many self-employed clients, as they face even more scrutiny over their job stability and steady income that will allow them to continue to pay a mortgage. In fact, it’s sparked additional document requests, including:
The lender will also need to verify the existence of the business within 20 days of closing (10 days for FHA loans).
Another change to be mindful of is that the timeline for verification of income and assets is much shorter than before. Before COVID-19, lenders typically needed to verify these documents within 120 days. Now, it is as short as 10 days – as the pandemic has caused some small businesses to close almost overnight.
If you partner with QLMS, you can check out even more resources for self-employed clients using GURU, our search engine that provides information on all of our products, guidelines and policies. Just type “self-employment” into the search bar on GURU.
As always, your QLMS Account Executive is available to answer your questions about self-employment, COVID-19 changes and anything else you may need to help your business grow.