Gig Economy: The Impact on Mortgages and Real Estate Ownership

Image of a delivery person on a bike with a food container backpack. Captioned: Gig Economy: The Impact on Mortgages and Real Estate Ownership

Many people hope to buy homes, but struggle to qualify for loans. And this means millions of first-time buyers are deferring their dreams of homeownership until they are in a stronger position to qualify for a mortgage loan.

Today’s renters are renting longer—often not by choice. Half of renters now in their mid 50s and older don’t anticipate buying a home any time soon, according to a survey carried out by Freddie Mac, and 15% don’t think they’ll ever be able to afford one. About a third of renters aged 40-54 don’t anticipate buying soon, with 12% predicting they, too, will never have the financial resources to buy. 

Could at least part of the problem be that the mortgage industry has not adjusted to the way millions of renters work?

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How Getting a Mortgage With a Co-Borrower Affects the Deed

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Loan underwriters are hard to please. When a mortgage loan approval eludes the hopeful homebuyer, another signature on the papers might be the only way to move forward.

Why Will a Lender to Refuse to Approve a Mortgage Loan?

The reasons can be several:

  • The hopeful buyer does not have enough credit history.
  • The applicant has not had any (or enough) W-2 income for the past two years. Lenders balk at 1099 and independent contractor income, so it’s harder for gig-economy workers or self-employed entrepreneurs to qualify.
  • The hopeful buyer’s debt-to-income (DTI) ratio—monthly financial commitments divided by gross income—is too high. The U.S. Consumer Financial Protection Bureau suggests that borrowers with a higher than 43% debt-to-income ratio can run into trouble making their monthly mortgage payments.

Should one or more of these factors frustrate the loan applicant, the financial backing of an additional person may demonstrate to an underwriter that the loan can be repaid.

Before finding or being an angel, it’s important to know what role the helper will play. The extra person might simply be co-signing—but in all likelihood they’ll actually co-own the home.

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Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?

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In May 2019, effective October 1, 2019, Nevada passed Senate Bill 382 amending the law pertaining to deeds of trust, foreclosure sales, and homeowners’ associations.

Among other things, this is a change to Nevada Revised Statute § 40.050, whose language states that a mortgage of real property is not deemed a conveyance. If a mortgage does not constitute a conveyance, the mortgage lender may take possession on the home upon the inhabitant’s default, bypassing a judicial foreclosure sale.

Nevada employs a deed of trust between the home buyer and the lender. A deed of trust places the legal ownership of a home with a designated trustee until the buyer—who holds equitable ownership—pays off the loan.   

Of course, some buyers do experience financial challenges and find themselves unable to pay their mortgages.

Here, we briefly explore the ramifications, as seen through a case that shook mortgage lenders’ expectations in homes they held legally through deeds of trust.

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You’ve Paid Off the Mortgage. What Happens Now?

image of money stacked next to a house captioned: You've paid off the mortgage. What happens now?

Congratulations! Paying off a mortgage is an impressive milestone.

Now that you have paid off all the debt on your property, your home state’s law will direct your lender to take certain actions. 

The lender will send you a certificate of satisfaction. This certificate, which the lender records in your home county, notifies the public that you have satisfied your obligation, and the lender has removed the lien from your property.

A few details of this process depend on what state your property is in, and whether your debt was secured through a deed of trust.

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Mortgages, Security Instruments, and Promissory Notes in Alabama

The short definition of a mortgage is that it’s a loan used to purchase real property. In Alabama, the mortgage is comprised of two parts: the security instrument and the promissory note. A security instrument is a specific type of document that provides security for the lender and contains terms (agreements) that apply until the buyer (borrower)repays the lender according to terms defined in an attached promissory note.

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Giving Up Ownership of Real Estate When You’re Still on the Mortgage

Don't get locked out of the house while stuck in the mortgage

It’s every homeowner’s nightmare scenario: you get a phone call from a mortgage company, telling you your home is in foreclosure and that you must pay now or face an avalanche of debt and legal actions. But you signed the house over to someone else months or even years ago! How does something like this happen?

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