There are some really great things about being self-employed, from being able to work in your pajamas to setting your hours. However, it can make some things complicated, like paying your taxes and proving financial stability. From credit scores to recent documentation, it can be a challenge for the self-employed person with their ever-changing bank statements.
This doesn’t mean that buying a home is out of your reach though. These 7 tips below will help understand what to prepare for and understand what lenders are looking for:
1.Have you been a loyal bank customer?
This can work to your advantage. If you’ve been dealing with the same bank for decades, you will have more chances of getting a loan, thanks to the fact that the specific people that have been working at your bank know your unique situation. Who knows they may even be able to provide you with helpful insights before you actually want to buy a home so you can make the right moves towards being approved for bank statement loans.
2.Consider making the move to a smaller bank or credit union.
If you’re currently doing your banking at a larger bank, consider switching to a smaller one if buying a home is further down the road. The qualifications are typically more accessible and not sold to larger institutions. Additionally, credit unions tend to have lower fees.
3.You may need to hire a mortgage professional.
As a self-employed individual, whether you work remotely in freelance work or do gig work, your income can see big swings. In this type of scenario, it could be best to work with a professional who can help you look around for the best home loan, unlike your local bank who will only be able to offer you what’s within their possibilities.
Keep your paperwork and documentation. This is one of the most important tips we can give you. Make sure to keep at least two or so years of income paperwork as you’re going to need it to be able to buy a home. If you are thinking of buying a home a few years down the road, now is the time to start saving that documentation. Trust us—you’ll need it! Being aware of how much home you can afford will help when applying for a mortgage.
5.How is your credit?
A good credit isn’t only needed for renting an apartment or home. You’re also going to need to have good credit if you want to buy a home. In fact, as a self-employed individual, having a good credit score can make a world of difference in you getting approved to buy a home. Again, this is something you can start working on now if you hope to buy a home in a few years. If you have any credit card debt, it’s wise to start paying it off now.
6. Buy with your partner.
Are you in a long-term relationship or married? Then, consider buying with the one you love. Perhaps they have a 9-5 and the two of you can prove your financial status is good-to-go for buying a home. You may both make the same money but your partner could have the stuff that looks good on paper.
7. Can you afford a larger down-payment?
Self-employed people often make quite a bit of money depending on how much effort they put into what they do. If this is the case for you, you may have some money saved up for the rainy days. Consider a payment larger than the 20% that most lenders require and some will be able to ignore the unique income you have in your statements.
It may seem tricky but it isn’t impossible to buy a home when you’re self-employed. If you foresee wanting to purchase a home in the future while working in your career as you are now, these tips can help you plan ahead and be ready when the time comes to apply for a loan.