by Guest Writer, Christopher Haymon of Adulting Digest
Securing a mortgage is a personal aspiration of many who are want the security of owning their own home. For freelancers or contractors, the journey to homeownership can be a bit more complicated, but not impossible. Here are some resources to help you buy the home of your dreams and secure a mortgage as a freelancer.
Applying for a home loan as a freelancer means preparing well in advance by saving up as much as you can.
- It’s always worthwhile to have a significant amount put away in your savings accounts to take care of emergency expenses. An impressive savings account can also help you in many other ways, including purchasing a property.
- Cut back on unnecessary expenditure. As a freelance worker, you can afford to forgo certain luxuries, such as eating out during your lunch hour or using your vehicle to get to work every day.
- It’s helpful to have a specific financial goal in mind so research the market in your area so that you have a ballpark of what you’re going to need. For instance, in nearby Winchendon, Massachusetts, the median home sale price is $310K.
If you have a freelancing or contracting business, you need to keep your paperwork up to date and stay on top of your legal requirements.
- If you have taken steps to start a new business, then choose a business structure that is going to save you money at the end of the day. With a limited liability company (LLC), you get significant tax advantages by avoiding double taxation. To save time and money, use an online formation service that’s already familiar with local regulations.
- Make sure you know what’s tax deductible, and what’s not. You can take advantage of tax savings by listing home office equipment and furniture as tax-deductible business expenses.
- Check the duration of time you’ve been self-employed. Usually, financial lenders will require you to have at least three years behind you as a freelancer or contractor to start the loan application process.
- See what deposit is required. In many cases, you will need to make a down payment when purchasing a home. But this depends on your credit score and the type of mortgage you qualify for.
- You may need to confirm your employment status. This is to determine the amount you can qualify for based on your earnings history.
A mortgage broker can help you find the right home loan that will suit your income and lifestyle.
- A Federal Housing Administration loan ensures that the loan will be federally insured should you default on payment. It also requires a lower down payment and doesn’t focus as much on your credit score.
- A bank statement loan is simpler to apply for, as you only have to provide a year to two years of your bank statements to verify your income. Interest rates may be higher with this type of loan.
- Choose a joint mortgage if you have a spouse that you can apply for a mortgage with. This gives lenders added assurance that there’s another person to support your home loan repayments, especially if their credit score is good, and they have a low debt-to-income ratio.
Being approved for a home loan as a freelancer or contractor can be easier than imagined if you plan for it accordingly. A few things you might want to prioritize are saving as much as you can beforehand and tracking your financial progress so the banks can see you’re worth lending to.
Have more questions about the freelancer lifestyle? Owl & Pen has been in business for the last 8 years, and we have lots of tips to share! Leave us a comment or email firstname.lastname@example.org if you’d like to get on our mailing list specifically for freelancers. We have some exciting offerings in the works!