Recent data from Griffin Funding highlights a growing divide in the mortgage market between self‑employed homebuyers and those who earn wages. Among borrowers who applied to more than one lender before closing, 21.4% of self‑employed respondents said an earlier application had been turned down, while only 14.5% of wage‑earners reported the same outcome. After statistical adjustment, the self‑employed group was 51% more likely to experience an early denial.
Shopping behavior is similar, but outcomes differ
Both groups shopped for mortgages at nearly the same rate – 31.1% of self‑employed buyers and 31.5% of wage‑earners applied to multiple lenders. The key difference lies in the qualification process. Self‑employed borrowers were more likely to cite concerns about qualifying (42.5% vs. 29.6% for wage‑earners) and were 48% more likely, after adjustment, to flag that worry.
More documentation requests for the self‑employed
Across the full sample of 23,299 borrowers, 73.2% of self‑employed respondents received a follow‑up request for additional income or asset information, compared with 67.7% of wage‑earners. The adjusted analysis shows the self‑employed group was 9% more likely to face such requests.
Other friction points also favored wage‑earners. Self‑employed borrowers were 38% more likely to need an extra co‑signer, and 56% more likely to report being “not at all satisfied” with documentation satisfaction scores.
Non‑qualified mortgage market expands rapidly
Polygon Research estimates non‑qualified mortgage (non‑QM) origination volume grew from $181.8 billion in 2024 to $239.3 billion in 2025 – a 31.6% increase. Loan count rose 24.7% to 697,605 originations, putting non‑QM loans at roughly 10% of the U.S. mortgage market by dollar volume and 10.2% by loan count.
Non‑QM products include debt‑service‑coverage‑ratio (DSCR) loans, alternative‑documentation mortgages, interest‑only structures, and bank‑statement loans that verify income through deposit history rather than tax returns. While non‑QM is not synonymous with self‑employment lending, bank‑statement programs are a notable segment because they accommodate borrowers whose income documentation does not fit the traditional pay‑stub model.
Why the gap matters for homebuyers
The Federal Housing Finance Agency and Consumer Financial Protection Bureau’s National Survey of Mortgage Originations cannot determine whether self‑employed borrowers who faced an early denial later secured non‑QM financing. Nonetheless, the data illustrate two concurrent trends: increased qualification friction for self‑employed buyers and a robust expansion of loan products designed for borrowers with non‑traditional income documentation.
Fannie Mae’s Selling Guide requires lenders to evaluate the stability of self‑employment income, analyze personal and business earnings, and conduct a written cash‑flow analysis or an approved equivalent. This thorough underwriting is essential to ensure borrowers can repay their loans, even though self‑employment often involves multiple accounts, variable expenses, and K‑1 income that do not align neatly with a standard pay stub.
Implications for the housing market
For families and individuals seeking to purchase a primary residence, the findings suggest that self‑employed buyers should be prepared for additional documentation and possible extra rounds of underwriting. At the same time, the growth of non‑QM products provides more options for those whose income streams fall outside the traditional Qualified Mortgage framework.
Overall, the mortgage landscape is evolving to accommodate a broader range of borrowers, while self‑employed homebuyers may still encounter more hurdles on the path to closing.
Original reporting: El Paso News (HLL/CB) — read the source article.
