Mortgage Challenges for the Self-Employed
I’m in the early phases of house hunting with my partner. If all goes well, we’ll likely be chatting up some lenders before the end of the summer. I have to say, this is a weird experience for me. I don’t like living on credit. I pay cash. I don’t use credit cards. And other than a relatively small student loan that should be paid off sooner rather than later, I no longer use credit in any way.
The plan was to keep it that way when I was single. I was willing to wait a few more years to buy, and the plan was to make the purchase outright. But then I went and got involved with Mr. Right a bit earlier than I could have expected (if I expected it at all at the time), and waiting years is far less of an option. Right guy. Right housing market. Looks like the right time.
So just when it seems all of my family and friends finally treat my work with respect, in steps the mortgage-hunting process where being self-employed is like being a leper. It doesn’t matter if I’ve been self-employed longer than someone with a similar income has been with a single employer. It doesn’t matter that my diversity puts me at less risk of having no money than if someone were to lose that single employer due to the crappy economy or any other reason. It doesn’t matter that I’ve consistently seen double-digit (percentage) increases in income year-over-year which is better than any traditionally-employed person I know. I’m still super duper risky because I happen to prefer working for myself.
So okay. I’ve come to terms with the idiocy of some of the requirements I’ve seen (which practically make me feel like I’d have to sign over the rights to my first born). But today I want to turn to you, my freelance friends. I want to know what I might not be prepared for yet.
If you’ve gone through the mortgage application and home buying process as a freelancer, tell me about it. Did you work with a great lender? Who were they? (I love referrals.) What kinds of challenges did you face, and how did you overcome them? If you could give a new freelance homebuyer like myself a single tip to prepare them for the process, what would it be? I, and I’m sure others reading this, would love to see your comments.
Luckily, I got my mortgage while still with a traditional employer, so I didn’t have that problem. My advice would be to steer clear of large national banks and instead go local. Small local banks often have a lot more flexibility in terms of lending and are better able to consider individuality than large ones.
And that’s all I’ve got for you. But didn’t Latoya just go through this?
I actually almost emailed you this morning about this, but I didn’t know if mortgages were up your alley w/ your financial work.
One of my biggest questions was whether we should be looking for a mortgage in our own counties (I live near the border so we’re in diff counties to begin with), or in the county where we’re looking at the most options (a third separate county, although there are a couple of backup options in my current county). Or does that not matter at all?
Great tip about the local banks though. I know a great one nearby that the rest of my family has used for decades now. They love it, and the bank has never sold out to a big-ass one. I’d never use my own bank. I hate them. Triple hate them even. I only stay there because I love the one teller and don’t want to deal with the hassle of changing banks until I settle into a more permanent home and know which one has branches around. I hadn’t even thought about that regarding mortgages. You rock lady.
And I’m not sure about LaToya. I’ll check in with her though. You’re just full of great ideas.
It’s not my forte, but from what I understand through some of my clients, it is probably a good idea to apply at a local bank serving the county you plan to move to, because they factor in local concerns to their underwriting. Of course credit unions are also and awesome way to go if you are qualified to become a member.
I thought I caught an article from her on your site in my RSS reader about business deductions lowering income in the eyes of a lender.
She did mention something about deductions, but turns out it was in relation to another kind of loan in that case (although equally applicable to mortgages). When I contacted her privately she echoed what you said about smaller banks, so excellent tip and one we’ll definitely keep in mind. Of course now we just poo-pooed our almost-dream-house (didn’t care for the seller’s agent, but more importantly we’re not interested in the costs of the major kitchen remodel we’d have to do — not to mention the hassle and strain that can put on relationships unnecessarily). So back to square one. Found some other potential properties yesterday, but none make me feel all warm and gooey inside yet. I always figured I’d be doing this single, and I’d be able to relocate anywhere in the world since I can work from anywhere. This whole “partner w/ a stable job” thing wasn’t something I put a heckuva lot of thought into. And it’s very limiting. Fortunately, he’s worth it!