Why do banks still use micro-aggregation for risk assessment when I'm trying to get a mortgage with a variable income as a freelance writer?
I'm in the process of buying my first home and I've been trying to get a mortgage for a few months now. I'm a freelance writer, which means my income can vary from month to month. Despite my excellent credit score, I've been having a hard time getting approved for a mortgage because of my variable income. The banks I've talked to all seem to be using micro-aggregation for risk assessment, which means they're looking at my income history over a short period of time and assuming I'll be able to maintain that income level in the long term. But what if my income is actually going to be lower in the future? I feel like this approach is too simplistic and doesn't take into account the realities of freelance work. I've heard that some banks are starting to use more advanced risk assessment models that take into account factors like my industry and experience, but I'm not sure if that's just a rumor. Can anyone explain why banks still use micro-aggregation for risk assessment, and what other options are out there for freelancers like me who are trying to get a mortgage?
1 Answer
I totally get where you're coming from - it can be frustrating dealing with variable income when trying to get a mortgage. Micro-aggregation is indeed a common risk assessment method used by banks, but it's not necessarily a perfect solution for freelancers like you.
The reason banks still use micro-aggregation is because it's a relatively simple and straightforward way to evaluate income stability. It's based on the idea that past income patterns are a good predictor of future income. However, as you pointed out, this approach can be too simplistic, especially for freelancers who face fluctuations in income due to factors like project-based work or seasonal demand.
Unfortunately, not all banks use advanced risk assessment models that take into account factors like industry and experience. However, some lenders do offer more nuanced approaches, such as reviewing your contract rates, recent income history, and other relevant factors. It's worth exploring these alternative lenders or discussing your situation with a mortgage broker who can help match you with the right lender.
Don't give up hope just yet - there are options out there for freelancers like you. Keep pushing for a more personalized assessment, and don't be afraid to shop around for a lender that's willing to work with your unique situation.
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