Many lenders rely on spreadsheets for income calculations, as they have served the mortgage industry reliably for years. Mortgage insurance vendors even provide these tools at no cost, adding value to their insurance offerings. But when is it time to move beyond spreadsheets? When does it make sense to choose a dedicated software solution? The answer, like many things…. it depends.

When Are Spreadsheets a Good Fit?

Low Volume
If you’re a broker or loan officer handling only a few loans each month, investing in a software solution may be unnecessary or cost-prohibitive. In these cases, spreadsheets can adequately meet your needs. Your goal is typically not the precise, fully documented analysis required for final underwriting; rather, you’re aiming to estimate income levels to help pre-qualify the borrower.

Low Complexity
For straightforward scenarios involving employed borrowers with minimal passive income, spreadsheets may be sufficient.

Pre-qualifications
If your focus is on prequalification assessments rather than final underwriting, spreadsheets can provide an effective way to estimate income suitability.

When Should You Consider a Dedicated Software Solution?

Underwriting
When you are responsible for loan underwriting, the limitations of spreadsheets quickly become apparent.  Spreadsheets don’t handle all of the scenarios, agencies, and incomes you will need to run an underwriting department.

Spreadsheets are static and don’t update with guideline changes to ensure you are staying compliant and getting the highest income for your borrower with the lowest risk to your organization.

A comprehensive software solution is invaluable, providing compliance checks, guideline advisories, automation, and workflow management. Attaching and managing versions of spreadsheets is inefficient, leading to lost productivity and potential errors.

Medium Complexity
For cases with multiple self-employment income sources, rental properties, or complex income streams, spreadsheets lack the capacity to perform trending, liquidity, cash flow, and residual income analyses required by agencies. Dedicated software is designed to handle these complexities with accuracy and efficiency.

Reps and Warrants
Home-built or third-party spreadsheets cannot offer your company the protections that come with reps and warrants. Purchasing software shifts risk away from the lender and onto the vendor, providing added security.

An income analysis vendor not only gives you a software solution for income analysis, they also shift risk out of your organization onto their organization.  This has a material benefit to your bottom line and limiting your losses due to buybacks.

Automation
Unlike spreadsheets, dedicated software can automate data entry through integration with loan origination systems (LOS) and optical character recognition (OCR) solutions. This automation drives significant productivity gains, freeing your team from manual data input.

Workflow Management
Software solutions are adaptable to user workflows and specific loan stages, providing tools that support sales and underwriting uniquely. With role-based access and workflow controls, dedicated software enables efficient collaboration and enhances team productivity, something spreadsheets simply cannot achieve.