So I started freelancing a few months ago and I’m kind of loving it. I’m making good money, I don’t have the stress of a commute, I’m working on varied projects with teams from all over the world… I can’t remember the last time I felt this challenged and fulfilled.
One thing we were hoping for was to finally move out of our old, tiny apartment into a townhouse or condo with room for our son and an office.
Everything was going well until I told the loan officer that was a freelancer. He then proceeded to crush my innocent dreams. Apparently he needs 2 years of tax information showing growth for me to qualify. He said this was pretty universal.
So my question to you guys is: is there anything I can do short of going back to work for the man in order to secure a loan? Would getting a relative with a steady job to co sign with me allow me to do it?
Cosigning should do it. Also years ago I bought a house with no income check, basically based on my credit score (reason is similar to yours). But I think that is rare today, if allowed at all. Yes the system is made for cogs in the wheel by those who provide jobs for those cogs. As a freelancer I have found the best way to acquire such things is to pay for them in full.
I don’t want to leave the co-signer on hook forever, could refinance solely on my name after the 2year period they need? Thanks for the reply, my dreams are rushing back, just reinstalled the trulia app
If you have a very large down payment, that may do it. Sometimes you can get a separate down payment loan against something, like a car, that wouldn’t be enough security for the entire condo. I know some people who acquired a house this way. They had paid-for cars, and managed to get a loan against the two cars that was for something like $30,000. This was quite a few years ago, and the house they wanted was about $90,000. So with a 33% down payment, the fact that they had both just moved into town for their jobs, and weren’t married yet (but were engaged, and the hall was booked, so it was a done deal), which had counted against them, went away.
Now, I’m not sure how hard and fast those rules were, and if this was mostly a judgment call on the part of some loan officer, but having a large down payment made a complete difference.
A larger down payment should help. Almost everything gets easier when you can put more down.
Co-signer should help but you may have to take YOU off completely. If you are the weakest link, sometimes the weakest link has to disappear off of the loan applications in order for the qualifications to happen. You’ll need to discuss this with your loan officer.
Yes, you should be able to re-apply and remove your co-signer in a few years.
If you are using a loan officer, and only looking at one institutions worth of products, I would recommend that you talk to a broker. They will be aware of a wider range of products, and can advise you better, assuming you find one that you trust.
What is your marital status? Do you have a partner and do they work? What type of freelancing are you doing?
If you can afford to buy a place, then you should be able to rent a nicer place as well. That may be safer in the long run anyway. There’s no guarantee freelancing will work long-term. What happens if other freelancers come into the market and drive down wages? What happens if that market drops out completely and you are stuck with a 30-year mortgage? If you’re renting, then you can more easily move to a cheaper place.
Another alternative is to stay in the tiny apartment and save like crazy. Live as frugally as you can so you can save up for a big down payment on a new place. The larger the downpayment, the smaller the loan will need to be and the easier it will be to get approved.
Don’t pursue co-signing. The co-signer will be responsible for the loan, and that could be disastrous for them and their credit history if you can’t make the payments. There’s no reason for you to put that risk on someone else for something as non-essential as wanting to buy a house. I could see having a co-signer on a lease if you were desperate for a place to live, but you’re essentially wanting a co-signer for a luxury purchase. If you want to buy a place, wait until you can do it with your own finances.
A retiree I know got a mortgage on a house by letting the new lender handle his investment portfolio. That required some extensive consideration, but the lender is a major institution and their performance and fees were reasonable. He would not have switched without the need for the mortgage, but is satisfied with how things turned out. The lender wasn’t only interested in the fees, the mortgage and investment management groups are separate, but apparently it is corporate policy that once they see that the investment portfolio is real and stable they are more willing to approve the mortgage-or something. Again, it was a friend and I don’t have all the details.
There’s no guarantee any job/company/industry will remain. Freelancing doesn’t have a corner on this market. What freelancing, like any small business has is the requirement to do more, both do the work & market for the next project.
For most people this will be years.
[ul]
[li]Stability in housing costs - rents go up, (fixed-rate) mortgages don’t.[/li][li]Once mortgage is paid off, housing costs drop considerably.[/li][li]Owning an asset after mortgage is paid off vs. nothing to show for renting[/li][li]Tax benefits to owning.[/li][/ul]
I’d call it a smart investment, not a luxury purchase.
No, but if freelancing wasn’t demonstrably more risky than “any job” on average, the actuaries wouldn’t have put such restrictions on it, and the OP wouldn’t asking the question in the first place. Remember, lending is an industry that’s often criticized for giving out money too easily.
It’s too late for you now, but one thing I would recommend for anyone considering freelancing is to make a point of establishing credit before actually leaving the steady job. Go ahead and get credit cards and home loans while you have the job in the background, because lenders generally won’t (or can’t) cancel existing credit as long as you keep up the payments. If you weren’t confident enough of your new income a couple of months ago to take the plunge, is it really surprising that a lender isn’t confident that your experience of a few months of freelancing is going to hold up for the next 30 years?
Co-signing is not something for a relative to do casually. Basically what the relative is doing is borrowing the money in their name and letting you use it to buy the house. They are responsible for all of the payments, and if you have bad luck, get sick, or slack off, they’re going to be out a huge credit hit or a lot of money. I wouldn’t co-sign for any amount of money that I wasn’t prepared to just lose outright, and even a cheap house is WAY above that threshold.
There are loans you might be able to get with a longer down payment or higher interest rate, you’ll have to shop around and they’re going to be more restricted now. I would probably just wait out the two years in your situation, I wouldn’t really trust a couple of months of freelancing as a template for income for the rest of my life anyway.
I would recommend going to a mortgage broker. They can go over your finances and try to hook you up with a lender. They can also tell you what, if anything, you can do now to get qualified.
