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FAQ: Applying for a Mortgage When You’re Self-Employed

Working as a freelancer offers many wonderful benefits, including the ability to work from home and set your own schedule. But self-employment isn’t all sunshine and rainbows. Some things, like getting a mortgage, can be significantly more challenging when you’re self-employed. This is largely because freelancers don’t receive a steady paycheck, and while you may consider your income reliable, it can be tough to prove this to risk-averse lending institutions.

If you’re thinking about buying a home in the near future, check out the following resources to learn how you can improve your chances of getting approved for a mortgage!

Q1: What are the first steps I should take before buying a home?

A1: Doing your research, seeking a mortgage pre-approval, and contacting a real estate agent will lay the groundwork for stress-free home buying.

  • Research home prices and housing market trends in your area.
  • Start saving money for a down payment. Putting at least 20 percent down is ideal if you want the most favorable loan rates.
  • Seek a mortgage pre-approval so you can get a ballpark figure of your maximum loan amount before looking at homes.
  • Find a local real estate agent, like Leigh Brown, who can help you find the right home, negotiate a great deal, and help you navigate the complexities of buying a home.

Q2: How does self-employment affect the mortgage application process?

A2: Mortgage lenders view self-employed people as more of a risk due to inconsistent earnings and unstable income sources.

  • Even if you earn a similar salary to a traditional employee, your income may fluctuate from month to month which can appear unreliable to lenders.
  • Reporting multiple sources of income can complicate your application and make it difficult for lenders to determine just how much money you earn every year.
  • Writing off a lot of business expenses will reduce your income and hurt your chances of securing a mortgage.

Q3: What can I do to increase my chances of getting approved?

A3: Anything you can do to make yourself appear less risky to lenders will help you get the mortgage you’re after.

  • Check your credit score, fix any errors, and find ways to improve it.
  • Pay off debts to improve your debt-to-income ratio.
  • Build up an emergency fund to show lenders you have cash available to cover your mortgage payments if you experience a lull in your freelance career.
  • Keep separate business and personal bank accounts to help your lenders differentiate between business and personal debt.

While there is no special mortgage application process for freelancers, you will need to work a little harder to get your application approved than you would if you were a traditional employee. Take the time to gather all the evidence you need to prove your income. Getting a mortgage as a freelancer is far from impossible, and with the right planning, you shouldn’t run into any major problems.

Are you looking for a home in the greater Charlotte area? One Community Real Estate Team Realtors can help! Contact us today so we can help you find your dream home! Call 704-507-5500 or email