Buying a Home When You're Self-Employed

Dated: July 20 2020

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While being an independent contractor, freelancer or entrepreneur can certainly be a freeing career choice, it also comes with some challenges. For instance, it can make getting a mortgage loan harder.

Without W-2s, a consistent salary and an employer to back you up, it’s harder to prove your income as a self-employed professional — let alone show you’re not a risk as a borrower.

Are you planning to buy a home or refinance while self-employed? These five tips could improve your chances of approval:

  1. Get your finances in order. You’ll need to prove your income through bank statements, invoices, profit-and-loss statements and balance sheets. Be sure they’re ready and organized before applying for your loan.

  2. Reduce your tax write-offs. Maxing out your deductions can seem smart, but when a home loan is on the line, it can actually hurt you. The more write-offs you take, the lower your income looks, meaning you seem like a riskier bet.

  3. Boost your credit score. Higher credit scores are always more appealing when it comes to getting a loan, so take time to improve yours. Pay down debts, settle any overdue accounts and ensure your credit report is accurate.

  4. Bring in a co-borrower. When you add a second borrower to the loan, their income is factored in, too. Make sure you choose a co-borrower with good credit, a low debt-to-income ratio and steady pay.

  5. Keep your work consistent. Don’t switch industries just before applying for your loan. It’s best if you’re in the same line of work for at least two years.

Getting a mortgage while self-employed certainly has its challenges, but it’s not impossible by any means. Reach out today for more home financing guidance.

Jennifer Langhover

Jennifer Langhover
Loan Officer
Highlands Residential Mortgage

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