Updated: Jan 5
Lenders tend to frown upon irregular income because they see it as showing that the potential borrower will not make consistent payments for the long term. That’s why getting approved for a mortgage as a freelancer can require you to jump through more hoops than if you had a traditional job with a steady salary.
Nonetheless, you shouldn’t let that keep you from buying a home and advancing to the next chapter in your life! Below, we share some practical tips and resources to help you prepare for your mortgage applications and secure the property of your dreams.
General Home Buying Tips
Let’s start with some general tips for navigating the home buying process successfully:
● Use an online calculator to figure out how much house you can afford. And don’t buy a home that will put you in a precarious financial position down the road!
● Research your desired area to see what types of homes and prices are available.
● Create a strict budget that accounts for all of your homeownership expenses and leaves room for unexpected costs.
● Consider your future needs and plans before buying a home. For example, will the home accommodate a growing family or a home business?
● Connecting with a top-rated realtor like Raymond Maestas can simplify the home-buying process.
Preparing for Mortgage Applications
Now, let’s cover a few things you will want to consider as you get ready to go through the mortgage application process:
● Open a business account to separate your business and personal expenses.
● Gather and organize any documents your lender will need for the application, including profit and loss statements, bank statements, and tax returns.
● Save as much as you can for a down payment to present yourself as a lower risk to lenders.
● Be wary of taking too many tax deductions. If you show a higher taxable income, you could qualify for a larger loan.
● Establish an LLC for your business to save money on taxes, which you can put toward your down payment. Learn more about the LLC California formation process.
Credit Building Tips
Your credit will play a significant role in whether or not you get the home loan you want.
● Make a realistic plan for eliminating your debts as soon as possible.
● Check your credit reports for errors, and report any discrepancies to resolve them.
● Pay all of your bills on time, and pay off debts early when possible.
● Avoid opening any new lines of credit while you are in the market for a new home. But keep paying on your current credit cards to strengthen your credit history.
Just because you’re self-employed doesn’t mean you can’t get your dream house. Consider the tips above as you set out to apply for home loans, and remember that, more than anything, lenders want to see consistency in your income and business growth. Keep working hard and paying your bills, and you will put yourself in an excellent position to secure a home!
Are you looking for a top-notch insurance agent? Learn how Raymond Maestas can help you with all your real estate goals! 510-932-2964