With so much talk recently about the gig economy, it's no surprise that many people find themselves wondering if they can even qualify for a mortgage if they are self-employed and working in a freelance industry. If you are part of the gig economy and have been thinking about buying a house, there are some things that you should know.
Mortgages Are Not Unattainable
One of the most common mistaken beliefs surrounding gig economy workers is that they are unable to qualify for a mortgage because of the unpredictable nature of their income. While they may not have weekly pay stubs and an employer W-2, they are gainfully employed, and as such, may still be eligible for a mortgage.
You Need Documentation
One thing that you need to understand if you're going to apply for a mortgage as a gig economy worker is that you are going to need a lot of documentation. For example, you will need to show at least two years of your signed tax returns documenting your earnings.
In addition to those prior-year tax returns, you will also be asked to provide a profit and loss statement for the current year to date. These three documents will help to show a pattern of your income stability, which helps to prove your viability as a borrower.
You Should Clean Up Your Credit
Before you start applying for any mortgages, take some time to clean up your outstanding credit. Pay off any open accounts so that you reduce your debt-to-income ratio. The lower this ratio, the lower risk you are as a borrower. You'll have a much better chance of qualifying for a loan if your lenders can see that you have open credit accounts that are all current and paid off.
Plan For Your Down Payment
As a gig economy worker, you need to be able to show that you can save up for and make the down payment without any problems. The larger your down payment, the lower credit risk you're viewed as. This is particularly important when you are applying for a mortgage as a gig worker because the larger down payment helps to offset the increased credit risk.
Working as a freelancer in this gig economy doesn't mean having to sacrifice dreams like home ownership. For the best chance of qualifying for a mortgage, work with a mortgage broker to apply for your loan. He or she can reach out to multiple lenders to find one who will meet your needs. Contact a mortgage lender like Cornerstone Residential Mortgage to learn more.
