Mortgage lenders love to see an applicant with a steady full-time job. Unfortunately, income can be a little less consistent when you’re a freelancer, making obtaining a home loan more challenging. With that said, it’s still possible as long as you take the additional steps necessary and can prove financial stability and growth. Here are some tips and resources to help you prepare for your mortgage application as a freelancer:
Think Like a Homebuyer
First of all, you will need to take all the same steps that any other aspiring homebuyer would take.
- Estimate how much house you can afford and resolve not to go over your budget.
- Connect with an experienced realtor in your area who can save you time and stress while house hunting.
- Diligently research available homes in your area to satisfy your needs and preferences.
- Try to get pre-approved for a home loan, which will reveal the type of mortgage you could secure and give you an advantage in the home buying process.
Prepare Your Finances
Now, let’s touch on a few steps you can take to get your finances in order:
- Get a credit report from each bureau (e.g., Experian, TransUnion, Equifax) to learn your credit score.
- Try to get your credit score to at least 750, which can help you secure the lowest mortgage rates.
- Form an SC LLC to receive pass-through taxation, which could leave you extra money toward your home purchase.
- Make a plan for tackling any outstanding debt that is weighing you down.
Win Over Lenders
Mortgage lenders have expectations, and you want to do everything you can to meet them.
- Find a reputable Ask friends and family about any lenders they know who have worked with freelancers in the past.
- Prepare all the income documentation your lender will ask for, such as your tax returns, profit and loss statements, and bank statements.
- Keep your credit utilization ratio below 30% as you seek a mortgage.
- Pay as much as possible A higher down payment will improve your chances of getting a mortgage with favorable terms.
As a freelancer, you will meet some challenges on your way to securing a mortgage. But if you know what to expect and prepare diligently, you can win over the lender and purchase the home of your dreams. Keep the tips above in mind as you start laying the groundwork for your mortgage application process and keep your income as healthy as possible.
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Special credits for this post to Karyn Winrich
