How Do I Get a Mortgage If I’m Self-Employed?

One in seven Americans earned a living as a freelancer in 2020. Unfortunately, mortgage lenders haven’t exactly caught up with the times. Banks and lending institutions continue to view self-employment income as risky and unreliable despite the fact that many freelancers earn a pretty comfortable living

For all of the self-employed aspiring homeowners out there, that means you’ll have to work twice as hard to get a mortgage. Great news in this economy, right? But that doesn’t have to derail your homeownership dreams. As business owners and homeowners ourselves, we understand how complicated the mortgage process can be when you don’t work a traditional job. To help you out, The Chris & Claude Co. presents a handful of resources to help you get organized to buy your first home.

Home buying 101: How to start the homebuying process

Where do you even begin when buying a house? Buying your first home can be totally overwhelming, but these steps will start your journey to homeownership off on the right foot.

  • First up, demystifying the home-buying process. In this blog post, we walk you through the basics of buying a home.
  • How much home can you afford? Answer this question by averaging your total income for the past 24 months then plugging it into a mortgage calculator.
  • See how far your budget will stretch by researching the median sale price where you live.
  • Decide what you need in a home. This is tough when you’re a first-time homebuyer, which is why we recommend visiting a lot of homes before you’re ready to buy.

Must-know mortgage tips for the self-employed

With your budget set and your wish list written, you’re ready to get pre-approved for a mortgage.

  • Mortgage lenders look at average income, income trends, and cash flow to determine a self-employed borrower’s creditworthiness. Proving your income requires a big pile of paperwork, so start getting your records in order now.
  • Lenders are requiring extra documentation from self-employed borrowers in the wake of the COVID-19 pandemic.
  • Keep in mind that lenders look at your net income, not gross. Taking too many deductions for your business could hurt personal goals like buying a house.

How to get approved and buy your dream home

If you have a stable income, great credit, and impeccable records, you may have no trouble buying a house as a self-employed borrower. But what if you don’t?

  • Self-employed homebuyers should consider a higher down payment to offset a lender’s risk.
  • Credit score also plays a big role in a borrower’s creditworthiness. If yours is subpar, improve your credit with these tips from American Express.
  • Don’t be afraid to shop around for a mortgage lender. Just because a big bank denied you doesn’t mean that your local credit union will. And as long as you don’t drag it out, comparison shopping for a mortgage won’t ding your credit either.

Buying a home when you’re self-employed can feel like a minefield. But while there are a few more hoops to jump through, it’s 100 percent possible to buy a home whether you’re a full-time freelancer, self-employed, or own a small business. When you’re ready to become a homeowner, let The Chris & Claude Co. help you achieve it with our tailored home-seeking services. Give us a call today at 717-201-0838.

– article written by our guest author, Adam Taylor –


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