7 Steps to Buying a Home On Your Own: A Guide for the Self-Employed and Freelancer.
If you are a self-employed or freelancer, one of the most significant barriers to homeownership can be your lack of reliable income. Unlike salaried employees who are paid every two weeks, your income may vary from week to week. The challenge is that mortgage lenders want to see a pattern of at least 12 months of documented income.
To help you get past this frustrating hurdle, we’ve compiled some tips on how to buy a home on your own as a self-employed or freelancer. Here are 7 simple steps for buying your first home on your own:
- Get organized with all your paperwork
- Understand what kind of mortgage you qualify for
- Build up savings by paying off high interest debt
- Create an emergency fund
- Educate yourself about credit repair and how it can help you get approved for a loan
- Meet with a mortgage broker who understands the needs of the self-employed.
- Get your finances in order.
Get organized with all your paperwork
You want to be as prepared as possible with the paperwork that you need before meeting with a lender. The most common documents they will request include your pay stubs, 12 months of bank statements, and your most recent tax returns. Each of these documents can help to paint a picture for the mortgage lender about your ability to afford the monthly payments on the house.
Make sure you have all this paperwork in order and organized before you meet with a mortgage broker who can help you. Do not go into any meetings unprepared; it’s not worth it!
Understand what kind of mortgage you qualify for
A mortgage broker will be able to help you explore the various mortgage types and find the one that best fits your self-employed or freelancer lifestyle.
For example, a self-employed person may wish to consider a 15-year fixed rate mortgage with payments that can be adjusted, a 15-year fixed rate mortgage without monthly payment options, or a 30-year fixed rate mortgage that is affordable.
Build up savings by paying off high interest debt
Paying down high-interest debt is a great way to build your savings in order to qualify for a mortgage.
If you’re carrying high-interest credit card balances, student loans, or other types of high-interest debt, paying it down will help you significantly when you are ready to apply for a home loan.
Take the money that would have gone toward your monthly minimum payments on these types of debts and put it into an account dedicated to saving up for your home purchase.
Create an emergency fund
You’ve probably heard this advice a hundred times before: in order to buy a home, you need an emergency fund. The reality is that the general rule is true, but it depends on your situation.
A lot of people might think they don’t have enough money to put together a sizable emergency fund. In that case, there are other options you can try.
If you’re looking for a more affordable option, consider setting up an alternative emergency fund with a credit union or bank. If you’re self-employed and have been with the same employer for at least 12 months, look into opening a line of credit from your employer.
Since this type of loan is based on your income, it’s possible to buy a home without an emergency fund if you’ve been with the same employer for over 12 months and have been making regular payments on time.
Whatever kind of funding source you choose, make sure to pay off high interest debt first so that your money goes where it’s needed most instead of getting bogged down by interest payments.
Educate yourself about credit repair and how it can help you get approved for a loan
Credit repair is a crucial part of the process of buying a home as a self-employed or freelancer. Lenders look at your credit history when you apply for a loan. If there are any errors, you may need to make corrections before applying for a mortgage.
If you need help with credit repair, contact a company like Credit Repair Pros. They offer a free consultation and can help you with any questions about your credit report.
Meet with a mortgage broker who understands the needs of the self-employed.
For self-employed individuals, a mortgage broker who understands the needs of the self-employed is essential. They will help you find a lender that is willing to work with your income and credit score.
Most lenders need to see a pattern of at least 12 consecutive months of documented income before they certify a loan. However, most self-employed individuals have income that varies from month to month. In order for a lender to understand how much money you make each year, they need an extensive understanding of your business and your clients.
It’s important to find a mortgage broker who not only understands the needs of the self-employed but also knows how to navigate through all the nuances in documentation and paperwork. A good mortgage broker will be able to find you the best rates and programs for people like you!
Conclusion
Buying a home on your own can be a daunting prospect, but with the right preparation and knowledge, it can be a rewarding experience. Keep this guide handy as you prepare to move from renter to homeowner. You’ll be able to navigate the steps with confidence and without the worry of being alone.
2 bonus tips:
- Stay motivated by setting goals
- Keep up on all the latest changes in the mortgage industry
We here at Capital Mortgages look forward to assisting you with Ottawa mortgage needs and approvals. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com
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