The Wall Street Journal:
The government’s recent moves to backstop the mortgage market have made it easier for many people with decent credit scores to get a loan.
But for many self-employed people – even those with pristine credit – the mortgage freeze has yet to thaw.
A reversal of the loose lending practices that led to the banking industry’s current woes was certainly expected.
But some economists and mortgage brokers say lending standards have become overly restrictive, which could be exacerbating the credit crunch and helping push home prices further down.
The changes are increasingly frustrating a group of borrowers whom banks once coveted: affluent self-employed professionals such as doctors, lawyers, accountants and small-business owners.
The chief problem for self-employed people is that they don’t have W-2 forms from an employer to document their full wages. For proof of income, they must rely solely on their income-tax returns.
But income for the self-employed is often understated for tax purposes, in part because they tend to take large business-related deductions.
Self-employed borrowers who don’t take any big deductions won’t likely face the same difficulty getting a loan.
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