Fannie Mae has enhanced its Income Calculator tool to help mortgage professionals serve the growing number of mortgage applicants in the U.S. who are self-employed and do not have traditional sources of income. Available now on FannieMae.com, lenders and other loan originators can leverage Fannie Mae’s web-based Income Calculator for immediate calculation of self-employment income at no additional cost.
The new interface provides an additional, free avenue to access Fannie Mae’s existing Income Calculator functionality, which the company introduced in 2023 to help lenders streamline their processes and reduce loan defects. Lenders also still have the option to partner with one of Fannie Mae’s authorized third-party technology service providers to automate the calculation of self-employment income streams during the underwriting process. With either solution, the lender benefits from an accurate income calculation and the resulting reduced risk of loan repurchase.
“Whether through our new web-based user interface or through an integrated technology service provider, Fannie Mae’s Income Calculator simplifies the process of underwriting the qualifying income of self-employed borrowers, which traditionally has been a challenging and time-consuming operation for lenders,” said Mark Fisher, Fannie Mae’s VP of Single-Family Credit Risk Solutions. “With the launch of our new web interface, originators now can select the solution that best aligns with their processes and meets their needs, while saving time and improving certainty in the quality of the loan.”
Tools for a new generation of borrower
Self-employed borrowers represent approximately 10% of the U.S. workforce and a growing number of Fannie Mae loan deliveries. Incorrect income calculation and documentation can cause defects, which are identified in Fannie Mae’s post-purchase loan quality reviews. With the Fannie Mae Income Calculator, lenders receive an accurate, validated income amount for use in the underwriting process.
Any individual who has a 25% or greater ownership interest in a business is considered to be self-employed according to Fannie Mae. Fannie Mae also generally requires lenders to obtain a two-year history of the borrower’s prior earnings as a means of demonstrating the likelihood that the income will continue to be received. The following factors must be analyzed before Fannie Mae approves a loan for a self-employed borrower:
- The stability of the borrower’s income
- The location and nature of the borrower’s business
- The demand for the product or service offered by the business
- The financial strength of the business
- The ability of the business to continue generating and distributing sufficient income to enable the borrower to make the payments on the requested loan.
Income Calculator is a Fannie Mae-hosted service that uses tax return data to calculate monthly income using current Selling Guide requirements before the lender submits the loan casefile to Fannie Mae. Income Calculator calculates and returns the monthly qualifying income amount along with actionable messages that help originators avoid common calculation and documentation mistakes. Originators can access Income Calculator through Fannie Mae’s web interface, CoreLogic’s Income Analyzer service, or PointServ’s Digitally Sourced Data service, with additional integrated technology service providers coming soon.
