Despite the many benefits of freelancing, such as more freedom on how to use your time and unlimited income opportunities, it still has serious risks. One of these is getting a mortgage.
Ever since the Great Recession, lenders created strict approval requirements, so aside from a good credit score, they will also need proof that you have enough income to pay off your debt.
Freelancing offers lucrative salaries for contractors. A freelance writer, for example, can earn $24 an hour or a total pay that can be as high as $104,000 a year. Nevertheless, income varies each month, which may not sit well for lenders.
The good news is you can still apply for a mortgage. West Jordan, Utah and other cities have many lenders who say that this is possible; however, you have to double your effort in showing you can afford it and work on more paperwork.
1. Credit Score
Although a good credit score doesn’t guarantee you will get a mortgage, it still counts toward your application. Build a solid history and aim for 700 and above.
2. Tax Filing
Just because you’re self-employed doesn’t mean you can avoid paying taxes. Besides, if you want to get a mortgage, your tax returns will be part of your requirements. Unlike regular employees, you need to file 1099-MSC, which is then attached to your tax return.
3. Average Gross Income
If you don’t have a fixed income each month, the lender will look at your gross income and expenses over the last two years. They will obtain the average of your income, deduct the expenses, add the depreciation, and then divide the final figure by 12 (months).
Applying and getting a loan approval for a mortgage as an independent contractor can be difficult, but you can do it. If you’re in Utah, get expert advice from a mortgage specialist in West Jordan, who can help you identify lenders that can accept your application.