[Note from editor: The “Mastermind Showcase” highlights companies and news from members of the GEM. Today’s showcase: RentSpree.]
RentSpree provides tenant screening services for property managers, landlords, and renters. The screening process collects rental applications and delivers credit reports, background checks, and nationwide eviction report data through a partnership with the credit bureau TransUnion.
RentSpree PRO is a subscription service offering additional tenant screening features, such as pay stub or bank statement collection, and automated reference checks to gather information from prospective tenants’ employers or prior landlords.
Renters can use RentSpree to avoid hard credit inquiries and apply for multiple properties with the same application.
What we like: The rental screening API enables partners to incorporate an automated screening process. Recent expansion of its MLS Partnership Program has been a strong route to growth, rolling out RentSpree to new partners such as Bright MLS.
Payday loans are also called cash advance loans, deferred deposit loans, post-dated check loans, or check advance loans. They are short-term, high-interest loans. People who use these loans tend not to have access to other types of lending, and this is a last resort to get them through to the next paycheck.
Many states consider these loans predatory because of their high interest rates and financing fees. Some states place caps on the fees and interest rates or ban this type of lending completely.
Read on to find out what a payday loan is, how they work, and other options for those who need a short-term loan or cash advance.
What Is a Payday Loan?
Payday loans, also known as cash advances, are high-interest, short-term loans, typically for $500 or less. They are notorious for having very high interest rates and fees. There are few payday loan requirements, but borrowers typically need to be over 18, have a checking account in good standing, and show that they earn a secure income.
Consumers can find these types of loans through online lenders, apps, and local brick-and-mortar merchants. The loan amount is typically paid back by direct debit once the borrower receives their next paycheck. Alternatively, loans may be secured with a post-dated check.
How Does a Payday Loan Work?
Consumers fill out an application with a lender and show proof of identity, a recent pay stub, and a bank account number if required.
Borrowers have to secure the loan with a post-dated check or agree to have the funds debited from their account when they are paid, usually in two weeks. Loans are usually between $50 and $1,000, and funds are deposited within a day or two. Borrowers can also receive cash.
People with bad credit and access to better financing tend to use these loans to help them get by temporarily. However, payday loan problems are well-known: High interest rates and exorbitant fees can trap someone in spiraling debt if they cannot repay the loan on time.
The Consumer Financial Protection Bureau states, “More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter.” Borrowers then face even higher financing fees and interest rates compounding their debt load.
Many states place caps on the interest rates and fees charged for payday loans; some states, such as New York, have outlawed them completely.
What Are the Requirements for a Payday Loan?
Most working adults qualify for a payday loan. Here are the most common standards.
Age
Borrowers must be at least 18 years of age.
Proof of Income
Applicants have to show proof of income, such as a pay stub.
Citizenship
Consumers may have to show proof of U.S. citizenship.
Bank Account
Borrowers need to have a bank account that is in good standing.
Payday Loan Interest Rates
Depending on the state, interest rates for payday loans can carry a 400% annual percentage rate (APR) or more.
In states that cap interest rates on payday loans, lenders may instead charge a fee that is a percentage of the amount loaned. Finance charges can be between $15 and $30 for each $100 borrowed.
Payday Loan Amounts
Payday loan amounts are usually $100 to $1,000. In some states, a borrower is allowed only one payday loan at a time. Other states, like Texas and Nevada, offer unlimited payday loans for customers.
Alternatives to a Payday Loan
Rather than take out a high-interest payday loan, there are better options for people in a precarious financial situation.
Credit Cards
If the borrower has a credit score, using a credit card is a safer bet than a payday loan. The average credit card interest rate is around 22%, while payday loan interest can be over 400%. However, if the borrower needs the cash to pay bills such as rent or utilities, that is often not possible with a credit card.
Cash Advance Loans
A cash advance loan puts cash immediately into your bank account. These loans are offered by online lenders, such as Earnin or PayActiv. These companies don’t charge loan financing fees but ask for “tips.” So, a borrower might tip between 5 and 15% of the advance. These apps are often marketed as payroll benefits, and they charge membership and service fees.
TSP Loans
A TSP account is a tax-deferred retirement savings and investment plan that offers Federal employees the same tax advantages as a 401(k) retirement plan. If you have a TSP retirement account, you can take out a loan from that plan without having to pay tax or penalties. However, you must pay the amount back to the account within five years with interest (which will be much lower than the interest on a payday loan).
Personal Loans
For consumers with a good credit score, banks and online lenders offer unsecured or secured personal loans. Unsecured loans are not backed by any collateral and will have a higher interest rate than a secured loan, but not as high as a payday loan.
Unexpected expenses can be paid for with a personal loan and at a lower interest rate. Many people take out personal loans to pay off credit card debt because the interest rate on a personal loan is less than the interest rate paid on their credit card debt. Getting approved for a personal loan isn’t hard if you have good credit.
Loan payback terms can be between two to seven years, with loan amounts typically between $1,000 and $50,000. If you manage the payments on a personal loan responsibly, you can build up a strong credit history. That is not the case with a payday loan, which is not reported to credit rating bureaus.
Recommended: What Is a Personal Loan?
The Takeaway
Payday loans are short-term loans that cash-strapped consumers use to get by until their next paycheck. The borrower is expected to repay the loan on their next payday, or they may submit a post-dated check. Interest rates are extremely high because of the risk to the lender that the borrower will default. Unfortunately, this is often the case, and borrowers can find themselves spiraling into debt as interest and fees accumulate. For this reason, many states have banned payday loans.
Payday loans are probably the worst option for quick cash. But a SoFi Personal Loan offers fixed, competitive interest rates on loans from $5K to $100K. And there are no fees ever.
SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Online Personal Loan overall.
FAQ
What are the requirements to get a payday loan?
Most working adults qualify for a payday loan. A borrower needs to be 18 or over, show proof of income (a paystub) and citizenship, and have a bank account.
Is proof of income a requirement for a payday loan?
A lender requires proof of income because they want to know you have the means to pay the loan back. A recent pay stub or similar documentation is typically enough.
Is taking out a payday loan a good idea?
Basically, no. A payday loan should only be used as a last resort, and if you are sure you can pay back the loan in two weeks. Even then, the interest you will pay will be much higher than a cash advance or a short-term loan from an online lender.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender. Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website . SOPL0322008
INSIDE: Need help knowing how to budget? This step-by-step guide will help you create a budget that actually works. Includes free printable budget spreadsheet template!
This post may contain affiliate links. That means if you click and buy, we may receive a small commission. Please see our full disclosure policy for details.
When you’re trying to pay off credit card debt or save money, you’ll hear it time and again: “You need a budget.” But if you’ve never created a budget, the mere thought may make you want to run and hide. Making a spending plan that works is not hard, however, if you have someone to help you.
If you’re ready, I can help. Below you’ll find step-by-step instructions to follow to create your budget, whether you’re a beginner or have budgeted in the past.
You can use a pen and paper with our printable form or software for online budgeting.
Improving your money management skills doesn’t just mean spending less. It also means learning about your spending habits and making changes.
A few tweaks may help you pay off your debt and reach long term goals, such as saving for retirement.
MY BUDGET JOURNEY
I know it can be terrifying to really look at how you spend your money. Trust me, I’ve been in your shoes. But I’ve learned that the things that were the most challenging in my life have led to the biggest rewards.
Declaring bankruptcy was a low point for me. But it also taught me many valuable lessons about personal finance. Most importantly, I learned why I must have a budget.
My husband and I used to have a “bare bones budget.” Except it wasn’t, really. Rather, it was a piece of paper where I’d write down who I had to pay every month, so I didn’t forget.
When we began our journey to become debt-free, we had to look at all aspects of our finances. One thing we did was sit down together to create a budget.
Seeing our expenses and income in writing for the first time still sticks with me. I remember being in tears. It was shocking to see that we had not been in better control of our money.
Creating a budget made us acknowledge where we were, and we realized that we didn’t like what we saw. It instantly provided us with a goal: We wanted to make positive changes and get out of debt. It took time, but we did achieve our goal (and that was one of the best moments of my life).
I am going to be blunt here. Creating your first budget and managing your money with it will bring significant challenges your way.
But I can guarantee that it will be worth it in the end. Just wait until you can finally control where your money goes instead of the other way around. It is liberating.
Before we begin, you can download our free budget form by clicking on the pink box below.
If you want something more high-tech, I recommend You Need A Budget (YNAB) or EveryDollar. These are apps I’ve tested and reviewed. Both work very well, so I’m confident recommending them to you.
WHAT IS A BUDGET?
A budget is a plan that lists your estimated income and expenses for a specific period of time. Most people use a monthly budget period. Budgets are helpful for everyone, no matter what your financial situation is.
Tracking your spending in the past helps you predict your future cash flow so you can start saving more.
WHAT SHOULD BE INCLUDED IN A BUDGET?
It’s important to include every dollar you earn and spend when making a budget. Tracking your income is easy, but your budget should also include spending categories. Some you need to remember to use include:
Your list may include more categories or fewer. Our budget template includes categories that will cover just about anyone.
Read more: The categories you need to include in your budget
HOW TO CREATE YOUR BUDGET
Now that you have your categories, it’s time to start filling in the numbers. Follow these instructions to prepare your budget.
Step 1: Gather Necessary Papers
Before you begin, be sure you have all the things you’ll need. These include (but are not limited to):
Bank statements, including debit card payments
Pay stubs
Credit card statements
Utility bills
Monthly bills from various stores
Personal/vehicle loan information
Step 2: Calculate Your Income
Next, look at your pay stub(s). Your budget should reflect your monthly income. If your paychecks come more frequently than once a month, some simple calculations are necessary to come up with an accurate monthly income.
Here are some formulas to help you:
If you’re paid biweekly (i.e., every other Friday), add four pay stubs and divide by two to get your average monthly income.
For monthly pay, you can use the income you see if the amount listed for each pay period is the same. Otherwise, add three or four months’ worth of income and divide by the same number of months.
If you’re paid weekly, take the total of four income periods.
When you’re paid hourly or on commission (i.e., your income fluctuates), add your last four months of salary and divide by four to reach an average. If your income varies frequently, you’ll need to adjust your budget more often than someone with a regular income. You may also want to follow our tips for creating a budget with irregular income.
Step 3: Determine Fixed Expenses
You must make certain payments, such as your mortgage or rent, insurance premiums and car payments, on a regular basis. These recurring expenses are usually a fixed amount.
If your bill varies slightly each month (for instance, if your utilities aren’t on a budget billing system), take the past three months’ worth of statements and average them to get your estimated payment.
You can use a spending form to figure out the exact amounts to include in your budget. For example, say your October gas bill is $45.79, your November bill is $52.95, and your December bill is $49.22.
Add those three numbers and divide by three to reach your average (in this case, $49.32). I recommend you look at the months when your utility bills are the highest. For instance, you may use more gas or oil in the winter, so use those months as the basis for your budget.
One of the most important rules of personal finance is to pay yourself first. Do this by adding categories for saving. You need to save for a rainy day as well as for long term goals, such as college or retirement.
You can set up automatic transfers each month from your checking account to a savings account for your emergency fund (aim to build up at least three months’ worth of living expenses). If you have a retirement plan at work, such as a 401(k), your money is automatically withdrawn from each paycheck before you get it.
Step 4: Calculate Discretionary Expenses
Your discretionary expenses include those that vary more, such as food, gasoline and clothes. Treat them the same way you treated the gas bills described in step 3. Make sure you take the average of three months’ spending to get the figures to add to your budget.
Be sure to include occasional expenses, such as car repairs and maintenance. The goal is to pay these bills with your regular income instead of running up credit card bills.
Step 5: Fill in the Numbers
Transfer the figures you’ve calculated above to the appropriate spots on the budget form or spreadsheet. Put your monthly income at the top, followed by the amounts for each expense category.
The categories listed on our form are a guide for tracking your spending. You can add categories that aren’t included or ignore the categories you don’t need.
Add all your income and all your expenses. Then subtract your expenses from your income. The result should be zero. If it’s not, then figure out the changes you need to make.
If your total is a negative number: You’re spending more than you earn. Reduce your spending until the total reaches zero.
If your total is a positive number: You haven’t spent everything you make. Either increase your debt payments or your savings.
FINE-TUNE YOUR BUDGET
After you complete your budget for the first time, you may feel discouraged. As mentioned above, it happened to us. But once we started to rework the numbers, I began to feel better. I began to feel like I could live with a budget. It was tough, but nothing in life worth having is easy!
To balance your budget, first look at your fixed expenses. One I always like to mention is cable. We found out we were paying way too much and found a way to cut the expense in half. (As much as we would like to cut the cord entirely, we’re not yet there.)
Perhaps you could do the same and sign up for a lower-cost cable plan to free up some income. There are many other ways to reduce your monthly expenses, such as reshopping your insurance or refinancing your mortgage.
Once you’ve cut back your fixed expenses, it’s time to look at your discretionary spending. Perhaps you’re eating out a bit too much, so your budget takes a hit. You may even be overspending on shoes. These are areas where you might need to scale back to balance your budget.
Making these decisions isn’t fun, but consider what is more important: paying off debt or buying a bigger television. These are choices only you can make. But if you’re willing to scale back now and pay off debt, it will be worth it when you can buy that new TV or those new shoes without guilt!
If you’ve scaled back on everything you can and your budget still doesn’t balance, make some calls to your debtors. Ask for a reduced interest rate or a lower minimum payment on your credit cards. You never know what they will accept until you make those phone calls.
My husband and I wanted to get out of debt, so we decided that we wouldn’t eat out as often. For more than two years, we ate dinner out no more than 10 to 20 times a year. We saved a lot of money, which we used to pay off debt. It was challenging, but the result was well worth the temporary sacrifice.
WHAT TO DO ONCE YOU HAVE A BUDGET
First of all – congrats! You now have a budget you can use. You should revisit and update your budget at the end of each month.
After a few months, you probably won’t need to make any changes. But if you get a raise, have an added expense or finally pay off your car, that will require a shift in your budget numbers. Remember that your budget must always end in zero!
Creating a budget isn’t easy, but once you have one set up and continue to refer to it, it will pay off. You’ll find it helps because you are now telling your money where you want it to go rather than it telling you where it is going each month. Financial control is a fantastic feeling.
Inside: This guide provides information on how to calculate the number of work hours in a year. By understanding this, you can make sure you have work-life balance.
We all know that there are 365 days in a year. But how many of those days are actually considered working hours?
There are only 24 hours in a day, 7 days a week, and 52 weeks in a year. So how many working hours are actually in a year?
The answer may surprise you.
In 2022, the average person works 38.6 hours per week (source). That’s equivalent to 2007.2 hours per year or eighty-three 24-hour days of work.
But not everyone works the same number of hours. In fact, there is a wide range of work schedules around the world. Employers, require some people to work more and others to work less.
So, how many working hours are there in a year?
How many working hours are Typically in a year?
There are typically 260 working days in a year.
Given in general, there are 52 weeks in each year and 40 hours per work day.
52 weeks * 40 hour work days = 2080 working days
A misconception with hours in a work year
It’s a common misconception that there are 2,080 work hours in a year, which is derived from 40 hours multiplied by the 52 work weeks in a year.
However, according to historical data, the average number of work hours in a calendar year is actually 2,088.
This number is arrived at by calculating the year-to-year fluctuations in working days over a 28-year period and rounding it down. To be more exact, there are 52.143 (365/7) weeks in a typical year and 52.286 (366/7) weeks in a leap year, resulting in 260-262 workdays and 2080-2096 work hours in any given year.
Thus, an average of 2088 work hours in an average year.
This is because the number of work days in a year fluctuates each year.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
How to calculate working hours in a year?
Given everyone reading this works a different number of hours per week, you need to know how to calculate how many work hours in a year based on your work schedule.
Then, you can figure out how to make the most of your time off. Especially if you are looking into how to flip money!
By following these simple steps, you can easily calculate the average number of hours you work each year.
Step 1: Determine your weekly hours
You must determine how many hours you work each week.
Consider the number of hours you work daily if there is a variance in your hours from day to day.
For example, if you work 8 hours per day, Monday through Friday, then you would work an average of 40 hours per week.
If you work 8 hours on Monday, Tuesday, and Thursday and 6 hours on Wednesday and Friday, you would work an average of 36 hours per week.
If you are clueless about how many hours you work for your employer, then use a tracking timer like Toggl Track to estimate your hours in the week.
As an hourly employee, you can check your pay stub for the listed hours worked per week.
This will give you an estimate of the total number of hours you may work in a year if you do not take any time away from work for vacations or holidays.
Step 2: Multiply by 52 weeks
Now, that you figured out the average number of hours worked per week.
Multiply your average number of hours per week by 52 (the number of weeks in the year).
This will give you the total number of hours you may work in a year if you don’t take any time away from work for holidays or vacations.
Step 3: Account for Vacation or Holidays
Thankfully, many employers allow paid time off for vacations or holidays.
Calculate the number of paid holidays or vacation days you receive in a year. Multiply the number of holidays by the number of hours you work in a day.
For example, if you get 10 paid holidays in a year and you work 8 hours a day, that would be 10 days X 8 hours = 80 hours.
In addition, if you get three weeks of paid vacation or 15 days and you work 8 hours a day, that would be 15 days X 8 hours = 120 hours.
Step 4: Subtract to Find Your Hours
Now, take the total number of hours worked (from Step Two) and subtract the total vacation or holiday days you added up in Step Three.
Using the 40 work week example, you would have 2080 working hours – 200 vacation/holiday hours= 1880 actual working hours.
Using the 36 work week example, you would have 1872 working hours – 200 vacation/holiday hours= 1672 actual working hours.
The result is your average number of hours worked each year.
Work Hours by Month 2023
For 2023, there are a total of 260 days and 2080 hours in the work year.
Month
Work Days
Work Hours
January
22
176
February
20
160
March
23
184
April
20
160
May
23
184
June
22
176
July
21
168
August
23
184
September
21
168
October
22
176
November
22
176
December
21
168
TOTAL
260 days
2080 hours
Does the number of working hours vary by country?
The answer is yes, the number of working hours can vary greatly by country.
Let’s take a look at the most extreme differences in the working hours between countries such as Mexico, where employees can work 48 hours in work week for a total of 2,496 work hours (source). Thus, Mexicans work the longest.
On the flip side, Danes prefer to stay within Denmark’s 37 hour official work week (source). Thus, Denmark’s employees only 1,924 hours a year plus working long hours is discouraged.
In the UK, you cannot work more than 48 hours a week on average (source).
According to Japanese Labor Law, which states employees are allowed to a maximum of 40 hours per week. (source)
In Canada, the standard working hours vary from 37.5-40 hours per week.
In China, they have a 996 work culture that is extremely common, which means working 9 am – 9 pm, 6 days per week for 3744 working hours per year. However, this practice is illegal because it is over the government’s 44 maximum hour work week or 2,288 work hours per year. (source)
However, it is important to note that these differences in hours worked do not necessarily lead to more productivity. An analysis of GDP data shows that Danes earn $55 more per hour than Mexicans, illustrating that time does not always equal money.
In conclusion, it is clear that working hours vary by country and by industry.
It is essential to research and discusses working hours with your potential employer before accepting a job, in order to ensure that you are not overworking yourself and to ensure that you will be compensated fairly for your time.
How can I ensure a good work-life balance with how many hours worked in a year?
Knowing the number of hours you work annually allows you to determine how much time you’ll have outside of work.
This can help you evaluate your work-life balance, which is the balance you have between how much time you spend at work versus the amount of time you spend doing personal activities, such as sleeping, eating, spending time with your family or friends, and completing your hobbies.
Since there is a total of 8,760 hours in a year, most people average 24% of their time at their jobs and sleep another (8 hours * 265 days) 33% of their life.
So, you have an average of 3,760 hours for you!
Tip #1: Take Regular Breaks:
Taking regular breaks throughout the day can help reduce stress and give you time to recharge.
Set a timer to remind yourself to take short breaks each hour and get away from your work area. Taking a walk around the block or a quick yoga session can help you stay fresh and energized.
Tip #2: Go on Vacations
Taking extended vacations away from work can help you reset and refocus.
Make sure to plan for a few days or weeks of vacation throughout the year and take advantage of the time off to rest and relax.
Tip #3: Disconnect from Work
After work hours, make sure to completely disconnect from work and enjoy your personal time. Turn off your work phone and email notifications, so you won’t be tempted to check in with work.
Tip #4: Spend Time with Family and Friends
Schedule regular get-togethers with your family and friends. Having social connections can help reduce stress and make you feel more connected to the people around you.
Tip #5: Talk to Your Manager
If you are feeling overwhelmed with too much work, talk to your manager about reducing your hours or delegating some of your tasks. Your manager should be supportive of your efforts to maintain a good work-life balance.
Tip #6: Do Self-Care Activities
Self-care activities are essential for your mental and physical health.
Taking care of yourself should be a priority.
Set aside time each day to do something that brings you joy, such as reading a book, going to the spa, or practicing meditation.
Tip #7: Consider a job change
If you feel like you’re working too many hours, you can talk to your boss about reducing your hours or looking for a new job.
If you want more control over your schedule and workload, you can also become your own boss and start a side hustle.
Learn how to make money online for beginners.
FAQs
Yes, there are overtime regulations when working in a year depending on the country you work in.
However, with many people paid on a salaried job, it is hard to justify overtime hours worked and subsequent pay that should be associated with it.
The hourly wage directly affects the number of working hours in a year.
Hourly employees can calculate their take-home pay by understanding the number of hours they will be able to work in any given year. This is significant for budgeting for large items and other financial considerations.
Learn how much do I make in a year plus use the salary calculator.
On the other hand, salaried employees typically work more than their typical 40-hour weeks.
Understanding how their salary is divided among the number of hours they actually put into their job every year helps them get a better idea of their actual rate of pay.
This can be used to their advantage when asking for a promotion or a salary increase.
Yes, there are restrictions on the number of working hours in a year, depending on the country.
In the US, there are no maximum working hours, however, according to the Fair Labor Standards Act (FLSA), when you work over 40 hours a week, you should be eligible for overtime pay.
In Canada and the European Union, the maximum amount of hours per week an employee can work is 48 hours.
South Korea, has a 52-hour maximum working week (40 regular house plus 12 overtime hours).
In Japan, there is a precise law on working hours, but there is an overtime limit of 40 hours per month.
In China, the maximum weekly hours to 44 hours.
How many hours is 40 hours a week for 1 year?
To figure out how many hours are in a year when working 40 hours a week, simply multiply 40 hours by 52 weeks. This calculation gives a total of 2,080 hours in a typical work year.
52 (weeks) X 40 (hours) = 2,080 (hours per year)
How many hours is a 40 hour work week in a month?
This varies with the number of days in the month. However, on average there are 21 work days per month.
Thus, a 40-hour work week in a month is equal to 168 hours.
21 (work days) X 8 (hours) = 168 (hours per month)
You will work fewer hours in February than in any other seven months with 31 days each.
How Many Working Hours in a year do you average?
Knowing the number of work hours in a year is an essential factor for creating a better work-life balance.
By calculating the number of hours you work annually, you can evaluate your current balance between work and personal time, and determine if you need to reduce your hours or take more time away from work.
This can help you avoid feeling overworked and stressed, and allow you to enjoy more of your free time.
Additionally, understanding the number of hours you work in a year can help you budget and plan your finances, so you can make smart long-term decisions.
Overall, it’s important to know how many working hours are in a year so that you can start to understand the concept of time freedom.
So, how many hours worked in a year do you clock?
Know someone else that needs this, too? Then, please share!!
Freddie Mac’s automated income assessment tool will soon be able to analyze a borrower’s pay stub data.
The new capability in Freddie’s underwriting system aims to help lenders calculate income faster and in a more precise manner, per an announcement by the government sponsored enterprise Monday.
The initiative, available on June 7, builds on both Freddie’s and Fannie Mae’s recent push to expand access to credit to first-time homebuyers and borrowers in underserved communities.
“Over the last year, we’ve consistently rolled out innovations to ensure our digital tools are improving speed and efficiency, reducing risk and, ultimately, helping us serve our mission by reaching more qualified borrowers,” said Kevin Kauffman, single-family vice president of seller engagement at Freddie Mac, in a written statement. “Today’s innovation further automates income assessment by using historical direct deposit pay patterns and current gross income from recent pay stubs, which can help more families achieve homeownership.”
Relying on a plethora of data points can widen the pool of borrowers, helping those “who may not qualify with traditional methods of underwriting,” Freddie’s press release added.
The agency noted that loans originated using its underwriting system were four times less likely to produce defects than loans without these technology offerings. “That’s vitally important because income verification issues account for nearly one-third of all purchase transaction defects,” the agency said.
Previously, both Freddie and Fannie Mae announced that they would accept loans for automated underwriting based on a borrower’s 12 months of on-time rental payments, while in mid-2022, Fannie also deployed a pilot program to encourage multifamily owners to share renters’ on-time payment data,in a bid to build credit among prospective homebuyers.
Save more, spend smarter, and make your money go further
Many Americans are living paycheck to paycheck and struggling to make ends meet. A paycheck has much more information than simply take home pay, and understanding your pay stub is the first step to good money management. Get familiar with what a pay stub means so you can take control of your finances.
Save more, spend smarter, and make your money go further
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