How To Get A Mortgage As A Freelancer in Boston

NextHome Titletown Real Estate Boston MA

Trying to get a mortgage as a freelancer comes with its own set of challenges. As a freelancer, you wear many hats – you’re in sales, operations, marketing, project management, and collections!  Imagine having the added burden of trying to convince a lending institution to give you a loan for a house without steady W-2 income. It’s certainly not impossible to get a mortgage as a freelancer, but there are more steps involved in the process. You just have to do your research, have the necessary documentation, and be prepared to jump through a few extra hoops. So here are some vital tips on how to get a mortgage as a freelancer in Boston.

The Tallest Hurdle

There is one fairly large hurdle you’ll have to overcome to get a mortgage as a freelancer in Boston. And that is the difficulty posed by not having proof of a stable, regular income and steady employment, as you would with a job. The simple fact is that lenders are hesitant to extend mortgages to those who are self-employed because they see them as greater risks.  But fear not, and read on…

Necessary Documents

In order to overcome this greater-risk, you’ll need plenty of documents so show that, although your income fluctuates as a freelancer, you aren’t a risk after all. So, instead of W-2 forms to verify income, here’s what you’ll need:

  • Year-to-date profit/loss statements
  • Previous two years’ tax returns (at a minimum), including Schedule C tax form and Schedule K-1 (for partnership or S Corp)
  • Bank statements, usually for at least the past six months
  • Business license from the past two years  (but only for certain kinds of freelancers)
  • Verification of employment from your CPA (often, but not always)
  • Verification letters from clients proving that you actually worked for them

Steps to Get a Mortgage in Boston

Then there is a fairly well-established process you’ll need to follow to get that mortgage. The major steps in this process are:

1. PREPARE WELL IN ADVANCE

All your necessary tax documents must be in order and absolutely must be accurate. Then, collect all the other essential business documents (listed above), organized and ready to turn over to the lender. Your goal is to show that your freelancing business is legitimate, profitable, and sustainable, so little risk to the lender.

2. SEPARATE PERSONAL AND BUSINESS EXPENSES

Make sure you have separate bank accounts – one for personal matters and one for business expenses. This will make it easier for the lender to track business expenditures and deposits in order to assess the profitability of your business.

3. EMPHASIZE YEAR-OVER-YEAR INCREASES

Do everything you can to illustrate the fact that your freelancing business makes increasingly more money from year to year. Proving business growth will increase your odds of qualifying for that mortgage.

4. HAVE A SUBSTANTIAL DOWN PAYMENT

Experts agree that coming to the table with a sizable down payment will show that you are much less of a risk as a borrower.  Aim toward a down payment of 20-25%.

5. FORFEIT SOME TAX DEDUCTIONS

Tax and real estate experts also advise giving up some tax deductions in order to make your taxable income appear greater, which may allow you to qualify for a larger loan. This will require some planning ahead.

6. GET LOAN APPROVAL BEFORE HOME SHOPPING

Because it’s a little more difficult to get a mortgage as a freelancer, it’s a very good idea to get loan approval before even thinking about house hunting. Then, when you do get an agent and begin actively shopping, you’ll know exactly what you can afford and that you can actually get the financing.

How To Get A Mortgage As A Freelancer in Boston

The Most Important Tip for Freelancers to Get a Mortgage in Boston

Now, we understand that all this can seem a little daunting to an already busy freelancer just to get a mortgage in Boston. But you can get expert help to ease the burden and provide guidance for navigating through the whole process.

Are you ready to buy a Boston house? We can help! Send us a message or give us a call today! (617) 657-9811


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