As the gig economy expands, more people are working as independent contractors rather than full-time employees. This shift is creating a different set of challenges for mortgage applicants who don’t have a traditional employer. For example, gig workers may not have a stable income stream or predictable work history.
They might freelance for multiple companies or have multiple jobs with no fixed hours. Since many lenders require a certain amount of income and history to approve a mortgage, this can be an obstacle for gig workers who want to buy a home. However, there are ways around that challenge. If you’re currently in the gig economy and looking to buy a home, here are some things to keep in mind when getting your mortgage:
If you’re a gig economy worker hoping to get a mortgage, you first should look at your lender’s guidelines. Each lender will have different income requirements and documentation needs, so it’s important to know what they are before beginning the application process.
The best way to figure this out is to contact a Mortgage Advisor or a Mortgage Broker and ask them about their requirements. A mortgage broker understands all the needs of a borrower without traditional income and can provide the best solution for your situation.
Some lenders will have specific guidelines on their websites. Still, it’s always a good idea to call a Loan Advisor, and they will be able to guide you on the best solution depending on your current financial circumstance. You might also want to ask your real estate agent about lenders in your area. They may have specific recommendations for lenders who will be more lenient regarding gig workers.
One of the biggest hurdles for people who work in the gig economy is saving for a down payment. Lenders often require a downpayment of 20 percent or more, even if you have excellent credit. Depending on your income, it might seem impossible to set aside such a large amount. However, the good news is that many lenders are willing to be flexible in this area. For example, some lenders will ask you to make a larger monthly payment to get your mortgage approved sooner. Other lenders will allow you to put down a smaller amount, such as 10 percent, which can be much more manageable for gig workers. In addition, you can use down payment assistance programs to help you save for a down payment. There are many programs available to people who work in the gig economy, such as the Federal Housing Administration program that provides down payment assistance.
One of the most important factors when getting a mortgage is your credit rating, which lenders use to determine your creditworthiness. It’s important to understand that having a low credit score is not the same as having bad credit. You can have a low credit score simply because you don’t have enough history on your credit report. This means you don’t have enough credit history to get a mortgage, but it doesn’t mean you’re a terrible credit risk. When dealing with low credit scores, the best thing you can do is build up your credit history.
This can be difficult for gig workers who don’t have a dependable income stream. You can, however, still, make progress on building your credit. One of the best things you can do is ensure you consistently pay your bills on time.
If you have a low credit rating or a limited income, one option for increasing your chances of getting a mortgage is to get a co-signer. However, it’s important to note that a co-signer isn’t the same as a co-borrower. A co-signer will be financially responsible if you fail to make your mortgage payments. A co-borrower will be listed as a borrower on the mortgage, meaning they will be responsible for the monthly payments.
If you get a co-signer, they will ensure the mortgage gets paid, even if you can’t. To get a co-signer, you’ll want to find someone with a good credit rating and enough income to make the loan payments. In some cases, you can use a family member as a co-signer, but specific rules apply to this situation.
Another critical factor in getting a mortgage is the type of loan you apply for. Most lenders offer various options, such as fixed-rate, adjustable-rate, VA loans, and Bank Statement Loans. A fixed-rate loan offers stability because the rate doesn’t change over time, while an adjustable-rate loan allows you to get a lower initial rate. If you’re currently in the gig economy, you may first want to go with an adjustable-rate loan.
You can then sign up for a fixed-rate loan once your income has become more stable or make larger payments to reduce the time it takes to pay off your loan.
If you’re currently working as a gig economy employee and hoping to get a mortgage, it’s essential to understand how your work situation might affect the application process. Many lenders have increased their scrutiny of gig workers, meaning it may be harder for gig workers to get approved for a mortgage but not impossible.
That’s where these tips come in, and the help of a Mortgage Broker. Knowing your lender’s requirements, building up your credit, and choosing the right type of loan can increase your chances of getting a mortgage as a gig worker.