You hear it from your parents, your peers, and even your friends: freelancing isn't a “real job” despite the fact that millions of Americans earn a living from freelance income. But if there's one place you didn't expect to hear it, it's from your mortgage lender. Unfortunately, banks don't like giving mortgages to freelancers because they view freelance income as risky and unreliable. But as a professional, you know that's not true. So how can you convince a mortgage lender?

If you're wondering how to get a mortgage as a freelancer, this guide is for you. Here's the need-to-know information for anyone buying a home while self-employed, brought to you by That Entrepreneur Life.

Step One: Prepare to Buy a Home

Preparation is the key to success when buying a home. Here's how you can make sure you're ready.

  1. The first step is determining how much home you can afford. A bank may approve you for much more than you're willing to spend. Set a budget that leaves wiggle room for income fluctuation and added costs.
  2. How competitive is your housing market? Research the median price and average days on market for homes in your area to understand how aggressive you'll need to be.
  3. Make yourself an attractive candidate. Lenders want to see two years of stable or increasing self-employment income, a low debt-to-income ratio, and emergency cash reserves from self-employed borrowers.
  4. Save for a down payment. It's not always necessary to put 20% down, but a high down payment strengthens your loan application.

Step Two: Shop for a Mortgage

What do freelancers need to get a mortgage? Before you talk to a lender, take these steps.

  1. Start by getting pre-qualified. Pre-qualification only requires general information about your income and is different from pre-approval. Pre-qualification is a good starting point for determining your mortgage options and rates.
  2. Research first-time homebuyer programs. This tool helps you find first-time homebuyer programs in your state.
  3. Get your documentation in order. Documentation requirements for self-employed borrowers are more complex than a typical mortgage application.
  4. With these steps complete, you're ready to choose a mortgage lender and get pre-approved. Here's what to ask when shopping for a lender.

Step Three: Buy Your Home

Now, the fun part: finding your ideal home. Freelance professionals have special considerations in their house hunt.

  1. Before you start browsing, know what you absolutely need in a home. A home office is high on the list for most freelancers.
  2. If you do work from home, pay attention to zoning. Zoning regulations may restrict the type of business you can operate in a neighborhood.
  3. Keep in mind that home offices are a leading amenity for buyers today. Your real estate agent will help you write a competitive offer to secure your ideal home.

Although you may think that you can’t get a mortgage as a freelancer, think again. With these tips and resources, you work your way toward the dream of homeownership!

Written by Derek Goodman. Derek is an entrepreneur who offers tips, tricks, and resources so that you realize your business ability and potential now, not later.

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