The Mortgage Resource Guide for Freelancers

The Mortgage Resource Guide for Freelancers

by Katie Conroy of advicemine.com

Securing a mortgage when you’re a freelancer can be a challenge. You likely have irregular income from month to month, high business expenses, and no job security, all of which can make lenders leery of loaning you money. Still, provided you have an ongoing source (or sources) of income and document it properly, you will succeed in getting approved. To help you out, we’ve prepared this handy guide that covers the essentials of freelancer a.k.a self-employed mortgages: 

There are no separate mortgages for self-employed people. You have to apply for the same mortgages W-2 workers do. The qualifications for these loans are as follows:  

• Your income has to be ongoing, stable, and sufficient. Your FICO score for the self-employed may need to be higher than average to offset the (perceived) higher risk.

• Your assets and reserves count. Lenders use them to see if you can cover down payments and closing costs – these come from your own pocket. 

• You need a solid DTI ratio. A ratio of around 36 is typically considered acceptable, although your mileage may vary. 

• Not all your income will qualify. Make sure it does.

It takes about 4 to 8 weeks, on average, for mortgages to be processed and approved. Make sure everything is in order before you proceed. Missing a key document will throw a wrench in the works. Ask for help from a friendly loan officer or friends and family if you get stuck.

• Get your documents in order to prove your income.  

• Make sure your accounts are in order. Separate business and personal accounts and keep records.  

• Consider structuring your business as an LLC. This can lower your risk profile and may help your application. 

• Apply for the mortgage with your favorite lender.

Your application may be turned down, despite your best efforts. Don’t let it faze you:

• Don’t give up. Ask why they turned it down. They are legally required to answer. 

• Troubleshoot the problem, when possible. If your income was down but is now up, for example, submit proof of the change.  

• Going somewhere else is an option, as is trying for a different loan type – like stated-income loans.

CONCLUSION:

The work isn’t done once you’ve secured a mortgage. You have to protect your credit score, preserve your new home, and make the mortgage payments on time to avoid foreclosures. Plan and be smart about your finances to make sure it all goes smoothly.  

When you’re ready to purchase a Nashville-area home, The Hsu House Team can handle every step of the process.

 Call (615) 243-8487 to schedule an appointment!