Being a freelancer has a lot of benefits such as building your own schedule, being your own boss, and even making a little more money. In the United States, 35% of the entire workforce is made up of freelancers and that number is only set to increase. In fact, by 2020 42% of Americans will be freelancers and chances are those people will want to be homeowners.
If you want to be a homeowner and you are a proud freelancer, there are some things you need to know about the home buying process. Since freelancers don’t receive a W-2 at the end of the year the mortgage process can be a little more complex since it is their responsibility to correctly record their income. So below we have highlighted some things freelancers should think about before applying for a mortgage.
Income Proof
Unfortunately, many freelance jobs don’t have the luxury of getting a consistent paycheck every week so proving your income in order to qualify for a mortgage is a little tricky. So if you want your earnings on your 1099 to count you must be able to provide at least two years of tax returns that show what you make as a freelancer. This is because your lender needs a clear picture of what you can afford.
Don’t Stop Saving Money
The more money you have when it comes to home buying the better, regardless of your employment or financial status. The more savings you have the better chance you have of gaining mortgage approval especially as a freelancer. Since freelancers don’t have that consistent income lenders can view them as a riskier investment so the more saving you have the greater your chances will be. Especially since the more you put down on a home the smaller your loan will be.
Keep A Close Eye On Your Credit
Good credit can go along way when applying for a mortgage but even more so when you are a freelancer. Although it may not make or break your ability to buy a home it will certainly help get a better interest rate and you will have more loan options to choose from. So before you begin your home search we recommend checking in on your credit to see where it’s at and if it needs improving. It can take some time to repair bad credit so the earlier you get started the better off you will be.
Cool It With The Tax Deductions
Another perk of being a freelancer is being able to deduct things off your taxes such as internet connection, home office, supplies, etc. However, the more you deduct the less income you will show on your tax return. It may be worth cutting back just a little bit if you know you are going to be buying a home in the next few years.
Look At Your Loan Options
There are so many different types of loan options out there that you are bound to find at least one that will work for you. One of the most common loans is a conventional loan that requires a 20% down payment and can save you some money over time. However, if you are not in the financial situation to put down 20% of the purchase price you may want to look at other loan option that requires a lower down payment. These loans include FHA, USDA, and VA loans.
Being a homeowner is certainly in the cards for everyone so don’t count yourself out just because you’re a freelancer!
