How to Buy a House as a Freelancer
You may be here because you have successfully built your freelancing business and now you want to make your living more secure by investing in a house. It may sound easy but you may have to face many problems in order to get your dream house. One of the biggest problems is the freelance mortgage.
As you are a single owner of your business you don’t need to get a surprise about this. Many individuals do not have any idea how to deal with such situations but you can relax as you are not one of those because we have got you covered.
In this article, we have listed down some valuable advice that you can follow and get a mortgage. By the end of this article, the troubling question about how to buy a house as a freelancer will be cleared from your mind.
1. You will need 2 years of tax returns
In order to get a mortgage loan from the mortgage lender or bank, you will need to have at least 2 years of tax returns. This will show how you have generated the income from your individual business.
Along with that, it will show that you are credible and will be able to afford the mortgage payment in the following years as well.
You can even opt for a cosigner. A cosigner is someone who will help you obtain loan terms and they can also help you to increase the amount of principal that you can receive.
2. Ask your lender to average the yearly income
In the pre-approval stage, you have to be clear on numbers that your lender will generate the mortgage. Usually, mortgage brokers average the income that you have on the file (in this case 2 years). But, sometimes they could use that number which is the lowest.
If there are particular reasons why your one tax return is lower than others, just explain it to them. Your reasons could be any – sudden changes in the family, maternity leave, or any other major life-changing event. Just explain it.
3. Your savings could come in handy
If you have accumulated money that you can give as a down-payment, this could be very beneficial for you. How? Making a heavy down-payment is a sign that banks and other lenders will notice and will excuse you for your fluctuating income.
4. Keep your credit score in check
Excellent or even good credit score can be very beneficial for a freelancer while hunting for a loan. This will prove your financial management and stability with your lenders.
One thing that you need to quickly take away is – try to expand your credit score as much as you can prior to seeking a loan. You can build up by applying for a fresh credit card if you don’t have one, paying bills off on time, keep the balance low, etc.
5. A tax deduction can haunt you
Tax write-offs can be both a curse and a blessing for a freelancer. There are some advantages to writing off some business expenses like office supplies, monthly rent for the home office, software subscription, etc.
Tax write-offs, however, can affect your mortgage loan, as if there are more tax write-offs, the income on the paper will be shown less.
Buying a new house as a freelancer could be an intimidating task, regardless of your job and earnings. You will have to show your achievements and records to the money lenders and banks in order to get a loan.
On the flip side, if you will see, there were few tips that could seriously come in handy and make your overall house hunting less daunting. I hope you find these tips valuable and use it wisely to get your dream house. Good Luck!