Being self-employed means being in charge of your time and money. Any form of self-employment whether you work as a freelancer, own a business or startup has its perks. As of January 2023, 10% of America’s workforce is self-employed. That is approximately 16.2 million people and the numbers are on the rise. So, when it comes to buying a house why does such a significant portion of the workforce face housing challenges? Unfortunately, most traditional banks, mortgage lenders and credit unions are often hesitant when it comes to providing loans for self-employed individuals. The reason is that they ask for W2s and regular paychecks. Thankfully, this trend is slowly changing.
Let’s take a closer look at how you can qualify for home loans for self-employed buyers in 6 simple steps and achieve your dream of becoming a homeowner.
Unlock the Keys to Your Dream Home by Qualifying for Home Loans for Self-Employed Buyers!
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Assess Your Financial Situation Thoroughly:
The first step of every buyer’s journey to homeownership is to understand their financial situation. Unlike traditional employed buyers, self-employed individuals have a complex profile. The source of income is varied which comes from freelancing, small business earnings or consulting. You might not receive a consistent month-to-month paycheck. This can be quite troublesome as traditional lenders ask for bank statements, W2s and paychecks. New mortgage lenders such as Dream Home Mortgage are willing to offer specialized home loans for self-employed individuals. They might ask you to show proof of income, 1099s or bank statements.
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Optimize Your Tax Returns:
When it comes to applying for a mortgage most lenders might ask you to submit your tax returns for the last 2 years. For traditional buyers this isn’t a big deal but for self-employed buyers like you this might be a bit complicated due to complex filings. Tax returns might fall short of presenting your full financial scope due to deductions and write-offs. Therefore, it is always a good idea to work with a reliable lender who specializes in offering home loans for self-employed individuals. They can help you present your income in the best light possible without the need for extensive documentation.
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Reap the Benefits of Good Credit Score:
A good credit score can go a long way in securing better loan terms and options. If you have a credit score above 620, it can be considered fair and better. Anything above this number is considered good such as 750 and above. But if you have less than ideal credit score due to your history of self-employment, there is no need to worry. You can improve your credit score for paying off any large debts and finding discrepancies in your credit report.
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Better Management of Debts and Payment:
When you apply for a mortgage, you might find paying off your existing debts quite taxing. But this can quite beneficial. All you have to do is talk to your financial advisor and get a tailor repayment plan made. This will help you make the process of repayment manageable. As you pay back the remaining debts and loans, it positively impacts your credit score. It also signals to lenders that you can an attractive candidate for mortgage. So, discuss your financial situation with mortgage lender and devise a repayment plan that works in your favor.
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Keep Track of Your Income Streams:
Do you have more than one source of income? Then it is crucial that you have a comprehensive documentation of all your income sources. Whether you receive payments from freelancing, consultation fees, alimony, and social security payments or from your small business, it is a good idea to keep track of each source. The documentation of all income streams will give the lender a complete overview of your earning potential and financial situation. This can help secure better loan options, terms and conditions.
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Develop a Down Payment Strategy:
You can also increase the chances of acquiring specialized home loans for self-employed individuals by offering a substantial down payment. In most cases, if you pay more than 20% down payment then you can definitely eliminate the need for Private Mortgage Insurance (PMI). This makes monthly repayments easier and also helps build faster equity in the house. A larger down payment also assures lenders and compensates for the lack of traditional income. Therefore, it is always a good idea to set aside savings for down payment as it will help you negotiate better mortgage terms.
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Secure the Best Home Loans for Self-Employed Buyers at Dream Home Mortgage!
Self-employment has many perks. So, don’t let it be the hurdle standing in your way to homeownership. Securing a mortgage as a self-employed buyer can be a daunting task but with the right steps and guidance, you can turn this dream into reality. If you want to learn more about specialized home loans for self-employed buyers, first-time home buyer’s program and how to build wealth through real estate then you should join the free webinar hosted by Dream Home Mortgage on 12th September 2024. You will be guided on these topics, get answers to all your burning questions and engage in talks with Mr. Hussein Panjwani and Mrs. Sharmyn Panjwani, the leading experts in this field. So, what are you waiting for? Sign up for the webinar today!
