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How to Purchase a Home as a Freelancer


Qualifying for a mortgage under normal circumstances is challenging enough, but what do you do as a freelancer? This is a question that concerns more people as online remote work makes freelancing more accessible. While the requirements for qualifying are essentially the same, how you meet those requirements will vary in relation to your specific circumstances.

Understand Your Lender’s Position

The first thing you will want to do is slip into your lender’s shoes. Even if you work with nontraditional lenders, such as Associates Home Loan, you still want to present yourself as a good risk. When a lender considers whether or not to approve your application, they want to feel reasonably confident that you will be able to pay back the loan. While the rest of this overview will provide specific tips on doing that, it is important to keep in mind that anything you can do to build confidence with your lender will go a long way towards helping you get approved.

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Provide Proof of Income

In every loan application, providing proof of income is essential. For those working traditional careers, this may be as simple as providing two years worth of weekly pay stubs along with tax returns for that same period. However, freelancers don’t receive typical paychecks in most cases. This means much more weight is given to the information on your tax returns. For this reason, it’s important to ensure every piece of information is accurate on your tax returns and that you save your returns for at least five years. Some lenders may want to see additional returns to verify your average income rate.

Don’t Underestimate the Importance of a Good Credit Score

Your credit score will go a long way towards helping you get the loan you want, especially as a freelancer. That’s not to say you can’t get approved for a mortgage with a low credit score, but this will make it more difficult and you’ll pay a much higher interest rate. The higher you can get your score by maintaining a good repayment history, the better your ability to get the loan you want at a good rate.

Make Sure Your Lender Averages Your Income

Every lender is different in terms of how income is analyzed in qualifying loan applications. While most lenders take an average of two years or more, some lenders will simply take the lowest annual income and use that as the average income. When you apply for your mortgage, ask the lender specifically how income is determined. If they tell you that the lowest income is taken as the average, ask to have the actual average calculated and to use that as the basis for evaluating your loan status.

Save Up a Generous Down Payment

One fact that worries lenders is that freelancers don’t earn a steady income. They may earn less one week while earning significantly more in another week. While this may average out for you, it stirs concerns in lenders trying to evaluate your financial stability. The best way to get around this and build trust with your lender is to offer a sizable down payment. The bigger the down payment, the more likely the lender is to approve the loan.

Currently, getting approved for a loan as a freelancer is still a big challenge. As freelancing work becomes more widely accepted, lenders will likely adjust their processes for approving these types of loan applicants. In any case, providing proof of income and establishing good credit will go a long way towards showing that you’re a good risk. If you can do that, you should have little difficulty in getting the loan you want.

Author Bio: Douglas Pitassi is a freelance writer and small business blogger.