There are so many pros to becoming self-employed. Taxi driving is a great example of this path and make sure you consider getting taxi insurance for this. However, if you’re self-employed, purchasing a home will be a lot trickier for you than if you work for a company. The reason for this is that lenders feel like you are at a higher risk of default than people who work for companies. However, there are specific steps you can take to increase your chances of being approved for a loan and buying a home if you’re self-employed. If you are struggling with the financial side of things then you might want to speak to an accountant for self employed individuals who will be able to assist you in paying your taxes in a simple fashion too.
Provide Proof of Stable Income.
Lenders are wary of giving loans to people who are self-employed because they often think this means you don’t have a stable income. In fact, you probably have a more stable income than W-2 Employees because you probably have lots of clients that provide you with money every month instead of just one employer. Show your lender proof of regular income with your tax returns and he or she will take you much more seriously.
Pay Off Your Debt.
If you have any debt and are trying to get a mortgage while being self-employed, lenders are going to run as far away from you as possible. Work on paying off your debt before you apply for a mortgage because this will show your lender that you know how to handle money wisely and effectively. With owning your own small business, maybe even your own contractor’s company, comes many bills like insurance. Hopefully, you would have contractors all risk insurance and are paying it off comfortably out of your income.
Apply For a Joint Mortgage With a W-2 Employee.
If your lender is nervous about giving you a loan as a self-employed individual, you could always apply for the loan with a W-2 Employee. This doesn’t have to be a spouse or partner if you don’t have one. You can also apply with another family member or a close, trusted friend.
Improve Your Credit Score.
If you are self-employed but have a great credit score, you are showing your lender that you are able to pay your bills on time with the income you are making. You are also reminding your lender that you don’t have any probable cause of default.
Put Forth a 20% Down Payment.
If you can put forth a 20% down payment on your home, your lender will know that you are serious about purchasing that house. The bigger down payment you put forth, the less of a risk there is for you to default on your home.
If you’re self-employed but want to purchase a home, try using these above methods and hopefully you will be able to move in to the home of your dreams as soon as possible!