Like many people, you probably dream of having a house of your own. If you’re a freelancer or contract worker, it’s important to recognize the additional challenges that you may face when trying to get a home loan. For example, lenders may shy away from extending large loans to people without a steady paycheck. This guide provides some tricks to help.
Avoid Red Flags That Can Make It Harder to Get a Home Loan
These faux pas can set off alarm bells with lenders.
- Learn about potential roadblocks to contractors and freelancers looking for a mortgage, like having a debt-to-income ratio that’s too high.
- Take steps to improve your credit score. If it’s too low, lenders will be reluctant to extend a home loan.
- Make sure you have sufficient savings for a down payment. Small down payments can be viewed with suspicion by lenders.
- Consider a bank statement mortgage if you’re a freelancer or contractor, and tax deductions make your income look smaller than it really is.
Structure Your Freelance and Contract Work to Save Money
These steps will organize your business and help you cut costs, so you have more money to put towards a down payment.
- Set up a business bank account to separate your business and personal finances.
- Talk to a business consultant for tips on improving your company’s finances.
- Find ways to reduce business overhead costs such as auditing your software subscriptions.
- Save your old tax records, so you have the paperwork on hand you need to get a mortgage application done quickly.
Follow Best Practices to Reduce Additional Costs When Buying a House
These tips will save you stress, cash, and hassle.
- Use a mortgage calculator to figure out how big of a home loan you need.
- Research possible down payment assistance programs to see how you can minimize your mortgage reliance.
- Consider buying a house in the winter season, when the market is less competitive.
- Make a down payment of 20% so you don’t have to get private mortgage insurance.
As a contractor or freelancer, you may face some unique hurdles when you try to take out a mortgage. However, these aren’t insurmountable challenges. The above tips and tricks can help you get past the roadblocks and get your dream home.