Quick Guide for Home Financing for Freelancers

by Dick Stoner 03/08/2020


 Photo by 200 Degrees via Pixabay

The gig economy has exploded over the past decade. Today, around 36% of the US workforce is freelancing and many more or self-employed small business owners.

While being your own boss does afford you great freedom to set your hours and often work where you want, you may face extra scrutiny when trying to get financing to buy a home.

Because your income comes from many sources and you may do your own bookkeeping, it's more challenging to prove your income. But fear not. Freelancers can get financing. You just need to be prepared.

Note that every lending institution may be a little different. But here's your quick guide for home financing for freelancers and other self-employed professionals.

1. You may need to work at freelance a little longer

If you just left a nine to five and started freelancing six months ago, you do not yet have the track record of consistent income that a loan officer will be able to see. The loan officer needs to know that you have the money coming in to pay this loan.

In most cases, loan officers like to see applicants who've been successfully freelancing for at least two years.

2. Clean up your bookkeeping

Are you the kind of person who pulls out a box of receipts on April 14th and then scrambles for the next 18 hours trying to account for last year? You may struggle with a loan officer. They need to see well-organized records of incoming and outgoing, just like any business.

You don't have to take an accounting course. But anyone should be able to follow behind your numbers on a spreadsheet to see exactly how you reached the figures that went on your tax return. 

3. Get a CPA signature

You may need to get the signature of a Certified Public Accountant (CPA) on your books for at least the last six months. But please don't do this before they ask for it because it will cost money. The more disorganized your financial records, the more it may cost. 

If you'd be embarrassed to show your bookkeeping to a CPA, please see the tip immediately above.  You can do this. 

4. Make your case

If your income fluctuates wildly or has dropped in the most recent year, that may be a red flag for a loan officer. Even if they don't ask about it, make sure they know why that dip occurred.

Perhaps you were taking care of an aging parent or a sick child. Some of your income may have been delayed for some reason. Be prepare to explain the ebb and flow of your income.

Don't appear to be a victim of circumstance. But do communicate irregularities that don't reflect the success you're experiencing as a freelancer.

5. Have a strong savings

Freelancers' income varies from month to month, but your mortgage payment does not. Show that you're stable and have a backup plan. These savings should be in addition to a down payment.

For more smart home buying tips, follow our blog.

About the Author
Author

Dick Stoner

Reist Corporation was incorporated in 1994 to renovate and restore commercial, industrial and residential buildings. Working from a 200+ year old farm in Washington County, MD , we have restored barns, warehouses, and even WWII Army buildings in Central MD. We maintain expertise in zoning and land use issues, and we stay abreast of market conditions and changing market statistics. We welcome the opportunity to work with buyers and tenants who wish to take advantage of current market conditions to lock in long term deals at favorable rates. Those able to sign 5 - 10 year leases in commercial transactions right now, are able to obtain the best rates in over 10 years, and those able to purchase are able to get pre-2005 prices on many types of buildings and land. On residential transactions, we continue to help buyers of bank-owned and short sale properties. We welcome the opportunity to work with you on your challenges, and we pay generous referral fees to agents from other areas who wish to utilize our services on Maryland property transactions

Certifications

Since 2002, I have worked on some of the largest real estate database systems in America. I have introduced online marketplace products to areas that were using residential MLS products for commercial real estate information, and I have worked on the expansion of some of America's largest real estate data systems in some of the largest MSA's in the country. Research is key to many commercial real estate valuation projects, and our firms' knowledge about how these systems work can help you reach the best information about other transactions in your area. We are active in Land Preservation programs and environmental offsets which can sometimes bring additional revenue that is crucial to making a transaction work. Nutrient offset credits in the Chesapeake Bay Watershed have become a new component in the valuation of active farmland and for many rural properties which involve environmental features like streams, woodlands, pastureland, etc. We've partnered with the experts at Blueline Conservation Incentives, LLC in Northern Virginia on nutrient offset and land preservation programs and together we are part of a team with expertise in all of the Middle Atlantic States as they strive to meet WIP - Watershed Improvement Plans in order to meet the 2017 and 2025 water quality goals that were set by the 2010 Chesapeake Bay Plan. 

Awards

2009 -MD Historical Trust -Award for Project Excellence in the Restoration of Frieda's Cottage at Chestnut Lodge in Rockville, MD