Many Americans dream of one day owning a home, but most need to get approved for a mortgage in order to make it happen. And while there are many types of home loans to choose from, qualifying for a mortgage isn’t quite so simple when you’re self-employed. For some tips on qualifying for a mortgage as a freelancer or contract worker, check out these resources from Caramel Chic.
Get Financially Fit
As a freelancer or contractor, you must be able to show lenders that you’re financially stable and can make mortgage payments each month. This means improving your credit score, reducing your debt-to-income (DTI) ratio, cutting business costs, and saving for a down payment.
- Work toward raising your credit score. Make sure you’re paying bills on time, reducing debt, and monitoring your credit report for errors.
- Reduce your debt-to-income ratio to improve your chances of qualifying for a home loan.
- Save money as a self-employed worker by starting an LLC in NC. You’ll gain tax advantages and protect yourself from liability. You may also be able to use the LLC to buy your new home.
- Think about how much you might spend on the purchase of a home and start saving for a down payment.
Gather Mortgage Application Documents
When applying for a mortgage, you’ll need to submit the following documents as proof of your self-employment earnings and income stability.
- Verification of self-employment, including written letters or emails from clients or a certified public accountant (CPA). Other options include state business licenses and Doing Business As (DBA) certificates.
- Proof of self-employment income, such as your profit and loss statements and annual tax returns.
- A letter of explanation. These letters are typically necessary when resolving potential red flags, including unsteady income sources, periods of unemployment, credit report errors, or large purchases.
Begin the Homebuying Process
Once you’ve taken the time to improve your financial situation and have gathered the different types of mortgage application documents you’ll need, it’ll be time to begin the homebuying process!
- Compare mortgage rates, lenders, and loan types.
- Work with an experienced real estate agent like Joanna Sobjanek. An agent can help you to search for homes in your price range.
- Keep your business in mind as you search for potential properties. Discover shares some tips for buying a home you’ll be living and working in.
Getting a mortgage isn’t impossible if you’re self-employed, but it does take a bit more planning. So even if you’re not ready to buy a house just yet, it’s important to begin the process early on. Start by improving your financial situation now to increase your chances of qualifying for a mortgage when you’re officially ready to take the plunge into homeownership!
Guest article written by Natalie Jones http://homeownerbliss.info