This post is sponsored by Beazer Homes
When I decided to resign from my job to work full-time on My Fab Finance, I weighed the pros and cons very carefully. There were two things that weighed heavily on my conscience about the transition…health insurance and buying a home.
These are major concerns.
For the bulk of my 20s I contemplated if buying a home was right for me. At one point I lived in 4 cities in 3 years and I was not in position-financially or mentally-to purchase a home. But as I learn more about wealth creation and yearn for stability, homeownership has worked its way into my 5-year plan.
If you are a freelancer or your household contains at least one household member that is a freelancer, then you understand how difficult it can be when you don’t receive a standard paycheck. Buying a home as a freelancer will require a lot more paperwork on your end but it can be done!
Here are four things to keep in mind before you begin the homebuying process.
1. Develop a Storage System and Keep Everything
By everything I mean money related everything. I know you are thinking, “Yay! More clutter!” but this is why you will need to develop a storage system online and offline.
What documents should you keep?
• Tax returns and related documents- You will need at least two years of income tax returns that reflect your freelance income. The tax return is vital, so if you have not been doing your taxes, you must start filing your taxes (not just for mortgage purposes, but legal purposes as well). The tax return is a document that just about every servicer trusts.
• Invoices- Your invoices prove that you are actually billing clients.
• Contracts- Servicers look for consistency so if you have long term clients you will want to show the contract stating that they will be paying you for all the information necessary to estimate your income.
• Profit / Loss Statement- Your profit and loss statement essentially shows how much of your revenue is actually income. This is done by subtracting all the expenses from the income. Several online bookkeeping programs offer this including Quickbooks.
• Bank Statements – You can’t lie about deposits which is why lenders like to see what is going into your account and what’s coming out. If you are paperless make sure that they can be accessed electronically and printed when needed
2. Have a Substantial Amount of Money in Savings
As much as we love the freelancer life, we know how uncertain it can be at times. Some clients aren’t always in a rush to pay us in a timely manner and those surefire gigs often don’t materialize. But mortgage payments are due monthly. Lenders want to know that you will be able to pay the mortgage if you run into difficulties with your clients or the demand for your services suddenly drops off the face of the earth (welp!). Savings not only provides you with added security, but it also indicates that you are financially responsible to save for rainy days and that you can handle the mortgage when business isn’t exactly “booming.”
3. Get Serious About Paying Down Debt
Like really serious. As mentioned above, lenders like to see stability. Nothing signals distress like large amounts of debt. Even if you are using credit to travel hack and earn points, it’s not viewed that way on your mortgage application and credit report. Avoid applying for new lines of credit and focus on paying down the lines of credit that you have. If you cannot pay down your credit while saving, it might not be time for you to buy a home. Paying off your debt will increase your credit score (which is always a win) and free up more of your income in the long run for incidentals and emergencies.
Check out our article on 7 Ways To Tell If You’re Ready To Buy a Home.
4. Don’t Wait to Explore Your Options
Understand the home buying process and the language. Don’t wait until you are ready to buy a home to start conducting research. Determine what type of property is best for you.
For example, do you want a turn-key property? A turn-key property is essentially move in ready. Or do you want to test your rehabilitation skills and purchase a home that needs a little (or a lot) of TLC?
I personally have often considered building a home. There’s something about New York City that has me craving “newness.” Call me crazy but I want to be the first person to take a bath in my bathtub.
If you decide that you want to build your own home, you will want to compare homebuilders in the region that you plan to purchase in and the options that they provide. For example, Beazer Homes which is one of the largest homebuilders in the nation has communities in Maryland, California, Arizona, North Carolina, Delaware, Florida, Nevada, Tennessee, and other states. Through Beazer’s Mortgage Choices program, they’ve identified preferred lenders which means the process is more streamlined since the relationship is already established between the builder and the lender. Which is a plus since my stack of paperwork will already be pretty epic.
The Preferred Lenders apart of Beazer’s Mortgage Choices program, compete for your business and offer prospective homeowners comprehensive, product portfolios, competitive rates and fees. When lenders compete you have the opportunity to save hundreds of dollars a year. An added bonus is that energy efficiency is also one of Beazer’s main pillars. Every home they build is ENERGY STAR® rated and certified, which also saves you money. And we are all about saving money around here.
Buying a home is going to be one of the biggest financial decisions you make in life. If you haven’t already purchased a home, research, research, research! You don’t want to walk into a situation blindly and uninformed.
Are you a freelancer who has purchased a home or is currently in the process of purchasing a home? What words of advice do you have for potential homebuyers that freelance?
Although this post is sponsored, all opinions are my own.