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••• The International Writers Magazine - 22 Years on-line - Housing Ladder

Roadblocks Freelancers Encounter when Purchasing a Home
• Indiana Lee


housing ladder

Once you’ve survived the early stages of freelancing, you can start to think beyond paying your monthly bills. Things like emergency funds, extra spending, vacations, and saving for retirement can start to factor back into the financial mix.

One big factor that can also come into focus again is getting a house. If you put buying a home on hold while you established your freelance career, you may be wondering how you can move the homeownership dream back onto the front burner.

While it’s possible to get a mortgage as a freelancer, though, there are quite a few hurdles that you’re going to have to overcome on your way to homeownership. Here are some of the most unique ones that freelancers often face.

Getting Approved for a Loan

house

Providing proof of income is one of the greatest homeownership challenges for freelancers. In the case of a traditional job, a lender typically wants to see a few months of pay stubs.

After all, in a world where individuals change jobs every 4.2 years on average, no bank is looking for a borrower to keep the same position for the entire length of a 30-year mortgage. What they want to see is stability. If you have a few months of pay, it shows that you can hold down a job at a company that is established enough to provide a consistent payroll.

In the case of freelancing, both the stable employer and the steady paycheck are often nowhere to be seen. Income can vary wildly from one month to the next and the only “business” that is providing a steady paycheck is … yourself.

This can often give banks a case of the jitters as they consider loaning you tens and even hundreds of thousands of dollars in a single lump sum. Their solution is often to demand multiple years of proof of income — usually at least two. They’ll want to see that you can be trusted to bring in enough money on a year-over-year basis to pay a mortgage.

You can counter this barrier in a few different ways:

  1. Use a lender like Fannie Mae and Freddie Mac who have set up streamlined proof-of-income options specifically for self-employed individuals.
  2. Save up for a larger down payment and then see if a bank will negotiate with you before the two-year period.
  3. Wait for two years and then present proof of income through your tax returns.

While none of these are ideal, there are few easy workarounds to provide a sense of security with a lender, especially when the amounts being borrowed are so enormous.

Unstable Income

cashtree

Of course, one of the biggest concerns when it comes to proving your income is how stable it will be. This is an issue that shouldn’t just be on the radar of the lender. You should also carefully consider how your fluctuations in income will impact owning a home.

After all, your mortgage, escrow, and insurance payments won’t change based on your income. They’ll be due, one way or another, regardless of how much money you bring in.

If you find that you’re making plenty of money but inconsistently, you may want to take some steps to earn more or, at least, level out your income and how it impacts your finances. A few suggestions for ways to do so include:

  1. Establishing a solid portfolio, updated resume, and any other factors that can help you avoid suffering from a long client turnover process.
  2. Finding high-quality clients with recurring work and then doing your best to retain them through stellar, dependable service.
  3. Creating a budget that helps you maintain an emergency fund and avoid financial stress caused by a temporary lull in income.

Smoothing out your freelance income isn’t always something that is necessarily required, but it’s highly advisable before you buy a home.

Gauging What You Can Afford

house for sale

One of the biggest factors of freelance success is setting reasonable expectations. If you live at your maximum income, you’ll quickly find that the definition of “maximum income” can change at a moment’s notice.

If you want to tackle something as financially long-term as homeownership, it’s important to gauge what you truly can afford with your freelance income. Start by looking at your yearly and monthly income.

Then find a good calculator that will allow you to mess with various payments. Find something that you can comfortably afford, and consider what kind of house that really allows you to purchase.

Home Buying Surprises

house on wheels

Saving up cash and securing a loan are challenging for freelancers. However, they can also become a distraction. It’s easy to focus on the financial end of the deal and underinvest in the rest of the home buying process. If this happens, it’s easy to get hurt by different parts of the experience.

Here are a few major home-buying factors that you don’t want to let slip off of the radar while you’re sorting through the financial side of things:

  1. Getting a good real estate agent: You want to find an agent whom you can trust and who is knowledgeable about self-employed home purchases.
  2. Finding a good inspector: You’re going to want any home professionally inspected. Make sure to save up to pay for an inspection and find an inspector who you can trust to do a thorough and honest job.
  3. What you want in the home itself: Figure out what factors are deal breakers for your new space. Do you want a good local school system? Do you need an inspiring home office? Keep these in mind as you prepare to go house shopping.

Finances will likely be your biggest challenge. But that doesn’t mean you should give these aspects less attention. Always factor them into the process so that they don’t become issues all on their own due to negligence.

Overcoming the Roadblocks

tiny house interior
Freelancing is an empowering lifestyle. If you’ve found financial success through freelancing, you already know what it’s like to take your fiscal and professional future into your own hands.

When you decide to purchase a home, you’re going to run into many obstacles. However, if you can approach each one with the same grit and tenacity that you apply to your freelancing, you’ll be able to overcome each roadblock and, in time, purchase the ideal home to suit your freelance income and lifestyle.

Editor's Memo: *Stay on right side of parents - See Bank of Mom & Dad

Indiana Lee © Indiana Lee - June 2021
indianaleewrites.contently.com

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