As more Americans earn income through businesses, consulting, and gig work, the mortgage industry is adapting to meet the needs of borrowers who fall outside traditional underwriting standards. Tom Hutchens, President of Angel Oak Mortgage Solutions, says the shift is long overdue.
Speaking on Business Trends Today, Hutchens explained that stricter lending rules implemented after the 2008 financial crisis created significant barriers for self-employed borrowers. Traditional agency loans rely heavily on two years of tax returns and net income, a method that often fails to reflect the true financial position of business owners.
“That doesn’t even tell the picture of whether or not you have the ability to repay a loan,” Hutchens said.
Angel Oak Mortgage Solutions was founded to address that gap, focusing on borrowers who are creditworthy but underserved by conventional guidelines. The company’s approach centers on evaluating a borrower’s cash flow through bank statements rather than tax returns. By reviewing 12 to 24 months of deposits and applying expense factors based on business type, lenders can better assess a borrower’s ability to repay.
The model has gained traction as the number of self-employed workers continues to rise. Hutchens noted that many entrepreneurs are unaware they qualify for a mortgage under alternative programs, even as their businesses generate steady income.
At the same time, broader housing market challenges persist. Rising home prices, higher interest rates, and increased costs for property taxes and insurance have made affordability a growing concern. These pressures have contributed to an increase in the average age of first-time homebuyers, as prospective buyers take longer to save for down payments and build sufficient income.
Despite these headwinds, Hutchens said demand for homeownership remains strong. Borrowers who can demonstrate consistent cash flow and meet down payment requirements still have viable options, including loans with as little as 10% down in some cases.
Investor appetite for non-agency mortgage products is also increasing, driven in part by strong loan performance and continued global interest in U.S. real estate.
“The tax return really doesn’t tell a lender what that person’s ability to repay a mortgage is, but bank statements show what’s actually coming in every single month.”
In addition to purchasing loans, Hutchens pointed to growing demand for home equity solutions. With trillions of dollars in tappable home equity nationwide, bank statement-based home equity lines of credit are emerging as a key product for small business owners seeking liquidity.
Looking ahead, Hutchens said the outlook for the mortgage industry will depend largely on interest rate trends and broader economic conditions. However, he remains confident that alternative lending will continue to expand.
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