This Is What I Had to Do to Get a Mortgage as a Freelancer

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There are a lot of horror stories about getting a mortgage as a freelancer. This writer had a different — better — experience. Read on for the details. 

I’ve heard a lot of horror stories over the years about all of the hoops you have to jump through to get a mortgage as a freelancer. As you might assume, banks like to see regular income, and they tend to prefer if that income is from a traditional salary.

However, it’s definitely not impossible to get a mortgage while self-employed. In fact, my experience was so surprisingly painless that I needed to share it.

The two-year rule of thumb

Part of what made my personal experience so simple is that I’ve been doing the same kind of freelance work for several years. In general, mortgage lenders want to see that you’ve been self-employed in the same industry for at least two years.

Essentially, the mortgage lender wants to know that you’re not only getting work in your field, but that you’ve been able to do so consistently for multiple years. This helps assure them that you’ll continue to be able to support yourself — and, more importantly, make your mortgage payments — in the future.

You don’t need to have the same clients or work on the same specific projects for that two-year period. You simply need to stay within your industry.

Depending on your lender’s rules, you might get away with having a little less than two years of freelancing if you were previously employed in the same industry. For instance, if you were an employee for a publishing company, then decided to become a freelance editor, this might count. This will vary a lot by lender, so it’s best to ask about it upfront.

The paperwork

Now that that’s out of the way, let’s get to the real meat and potatoes: the paperwork. Here’s a look at the income-related documents that I needed to provide to get my mortgage:

Two years of tax returns: I had to submit the previous two years of completed tax returns. The lender was looking to see if my income grew, or at least stayed the same, during that time. (Regular applicants typically only need the previous year’s W2.) The lender will average your income over those years and use that number for your application.A profit-and-loss (P&L) statement: I applied for my mortgage in late spring, after the first quarter was over, so my lender wanted to see a year-to-date P&L. This was to show that my income was still on track to match previous years. Since I use accounting software, this was easy to generate. Depending on your situation, you may need to have an accountant provide the document.A personal letter: Because I was buying in another state, I had to show that my income wouldn’t be impacted by the move. As an employee, you would do this with a letter from your employer. Since I am my own employer, I wrote a short personal letter explaining that my self-employment income was independent of my location.

And that’s basically it. Well, alright, there was a ton more paperwork to get a mortgage, but these are the things that were unique to my freelancer status. The rest of the mountain of documents involved will be the same no matter how you make your money.

Extra help from great credit and a small bank

Any time you’re getting new credit, be it a credit card or a loan, your credit history is going to be a big factor. While I can’t say for certain, I believe that my excellent credit history helped smooth my journey just as much as my years of freelancing experience and consistent income.

I also need to give some of the credit (forgive the pun) to my bank. I went with a small, local bank that was very happy to get my business. Had I chosen a multinational banking conglomerate that didn’t need — or even want — to provide my mortgage, there’s a good chance the process would have been a lot more complicated.

In the end, I don’t think that my experience getting a mortgage was any more complicated than it would have been had I been a regular employee. Some of the documents were different, but they weren’t any harder to gather. (If anything, not needing to do any back and forth with an employer may have even sped things along.)

Your personal experience will most likely vary, but hopefully this helps assure all you freelancers out there that homeownership is entirely within your realm of possibility.

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