BlogHome Buying Tips for Self-Employed
Posted about 2 years ago

Home Buying Tips for Self-Employed

Home Buying Tips

Buying a home is a major financial commitment, but purchasing property can be a greater challenge for the self-employed. If you have abandoned the corporate world to go your own way, buying a home could be more difficult.

Whether you are a freelancer, gig worker, business owner or simply self-employed, you can successfully buy a home, even if the challenges are greater. Here are some timely home buying tips for the self-employed.

Understand the Challenges

No matter how successful you are as a self-employed business owner, qualifying for a mortgage could be an uphill climb. Self-employed individuals face a number of challenges, including uncertainty of income, seasonality of earnings and potential tax problems.

Lenders know all this, and they may subject self-employed home buyers to additional scrutiny. Being aware of that scrutiny is the first step in the process, and the sooner you start the better off you will be.

Get Serious about Income Documentation

Income documentation is far more complicated, and much more difficult, for the self-employed. Without a W2 to back up your claims, proving how much money you made is no easy task.

If you are planning to buy a home, it is time to get serious about your income documentation. Keeping detailed records of the money you receive, the clients you bill and the amounts collected is an essential part of the preparation.

Do not assume that your income tax returns alone will be sufficient. Many mortgage lenders will want to see additional documentation, including income projections for your business. The more information you can provide the better, so gather as much income data as you can.

Find the Right Agent

For the self-employed home buyer, the choice of agent could be critical. Not all real estate agents are equally skilled at dealing with self-employed buyers, and not all agents are aware of the challenges those buyers face.

Finding the right agent could be more than half the battle, so take your time and get it right. Seek a real estate agent who understands the needs of self-employed home buyers, one who can help you navigate those sometimes difficult waters.

Shop Below Your Preapproval Range

Getting approved for a mortgage is a vital part of buying a home, but for self-employed buyers it is only half the battle. Self-employment income is notoriously unpredictable, and those changes can make paying off a home more difficult.

If you want to sleep more soundly at night in your brand new home, buying less house than you can afford is a good place to start. Shopping below your preapproval range can reduce the risks of home ownership and give you more cash for repairs and upgrades.

Make Sure Your Business is Fully Licensed and Registered

Good recordkeeping is an essential part of the mortgage qualification process for the self-employed, and that starts with the licensing and registration of your business. If you want to qualify for the home loan you need, make sure your business holds all the necessary licenses, and that it is registered with all necessary entities.

Even if you never thought about formal registration before, it is important to take this step now. Mortgage lenders will look at your business registration, along with your tax records, income documentation and other records.

The rise of the gig economy and the use of freelancers has led to an increase in the ranks of the self-employed. And while the freedom and flexibility of self-employment is a positive in many respects, it can make mortgage qualification more difficult. If you are self-employed and buying a home, the tips listed above can increase your odds of success.

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