You don’t need a 9-to-5 job to buy a house.
Though self-employed professionals do face a few more challenges than traditional income earners, buying a home is still very much an option for these workers. The key to success? That lies in preparation — getting your ducks in a row long before beginning that house hunt or getting pre-approved for your mortgage loan.
Are you a self-employed worker looking to buy a house? Taking these steps will give you the best shot at success:
1. Improving your credit.
Your credit should be your No. 1 focus leading up to your home purchase. To offset the extra risk you bring as a self-employed borrower, you want your credit to be as spotless as possible. That means no late payments, no overdue accounts, and no collections attempts in your name.
You should also work on boosting your score. Typically, it’s easiest to qualify for a loan if you have a 740 or higher. To get to this point, work on paying down your credit card balances and report any errors you find on your credit report.
2. Getting your documentation in order.
As a self-employed pro, you’re not going to have pay stubs, W-2s, or other similar paperwork to give to your lender. Instead, you’ll need to focus on things like client invoices and contracts, which prove you’ve got a steady workload, and bank statements, which prove regular and consistent cash flow to cover your mortgage.
Be prepared to give your lender documents for at least the last three to six months. They’ll want to establish a long history of positive cash flow and employment before approving you for a loan.
3. Avoid adding more debt.
Don’t take out any new loans or rack up credit card debt as you approach your home purchase. The more debt you take on, the higher your DTI (debt-to-income) goes — and that means a bigger risk to the lender.
You should also work to reduce the debts you already have. If you can get your DTI low, ideally below 30%, it can make qualifying for your mortgage much easier.
4. Save up that cash.
Cash is king when you’re a self-employed borrower, so start saving up what you can now. When it comes time to buy, use the cash to make a larger-than-average down payment. This reduces the risk you pose to the lender and makes it easier to qualify for a loan. Having more cash in the bank (also called “liquid assets” by lenders) can help your case as well.
Self-employed? Get help now
If you’re a self-employed professional hoping to buy a home, get in touch with Premier Nationwide Lending today. We’ll help you prep for homebuying success.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.