You dream of owning a home but feel overwhelmed by the idea of getting a mortgage. After all, you’re a freelancer!
True, it can be challenging to navigate the world of home loans without a steady paycheck or traditional employment history. But it’s also entirely possible to secure a good home loan as a freelancer. It just takes a bit of knowledge and preparation. Freelance Life Magazine shares our top tips and insights on preparing for and successfully landing a mortgage that meets your needs when you’re self-employed:
Why Do Lenders View Freelancers Differently?
There’s one primary reason it’s harder to get a mortgage as a self-employed individual: Lenders look at you differently than they do 9-to-5 employees.
- Freelancers often have fluctuating income, and some lenders may be nervous about your ability to make consistent mortgage payments.
- Without a traditional employment history, lenders may perceive you as a higher-risk borrower.
- Unlike traditional employees, who can provide W-2s or pay stubs, you might struggle to prove your income and financial stability.
- You may also experience periods of no work or low-income months, leading lenders to question your ability to maintain a mortgage payment schedule.
What Do You Need for a Down Payment?
There’s no question that the more money you can pay down on a home, the better your chances of landing a loan and getting favorable terms.
- To avoid paying private mortgage insurance (PMI), aim for a 20% down payment on your home.
- You can use your savings to contribute toward the down payment. Start saving as early as possible to accumulate the necessary funds.
- Lenders might consider liquid assets, such as stocks or bonds, as a source of down payment. Be prepared to provide documentation to prove ownership and value.
- Consider asking family members or friends for a gift or loan toward the down payment. Just ensure your lenders are aware of any gifts or loans and that they meet their requirements for acceptable sources of down payment funds.
How Can You Save for a Better Situation?
Getting a mortgage for your dream home is a major accomplishment. You just want to make sure you don’t put yourself in a precarious financial situation.
- Create a realistic budget and stick to it. Doing so will help you keep track of your spending and identify areas where you can cut costs.
- Try to minimize debt as much as you can before purchasing a home. You’ll be able to divert more funds toward your down payment and mortgage payments.
- Consider taking on additional freelance work or side hustles to boost your income. The extra cash can go toward your down payment, emergency fund, and other savings goals.
- Establish an LLC to protect yourself from potential legal and financial problems.
- Look for ways to reduce expenses, such as shopping around for better insurance rates or negotiating bills with service providers. Every little bit counts toward your savings goal!
Securing a good home loan takes time and effort, but it will prove to be worth it in the end — when you finally have your own place to call home. Don’t hesitate to reach out to a mortgage broker or financial advisor for additional support. You can achieve your dream of homeownership with the proper preparation and mindset. So, go out there and make it happen!
