Love being your own boss? There are certainly many benefits to working for yourself, including control over the type and nature of the work that you do, and the flexibility you can enjoy in terms of your working hours and environment. That’s not to say the freelance life is completely full of free-wheeling ease and independence. For one thing, the process of getting approved and securing financing in order to purchase a home or property is a little less straightforward for those who fall into the self-employed demographic.
With part-time, contract and freelance work on the rise in Canada, it’s not surprising that questions surrounding securing a mortgage as a self-employed individual are also on the rise. Here are three things you should do in order to ensure you’ll be able to get the financing you need in order to secure your dream home.
1. Understand the challenges
To avoid encountering any unexpected surprises or disappointments, it’s important for self-employed individuals to understand the challenges that they may face during the mortgage approval process. Be aware – there are definitely a few more conditions you’ll need to satisfy in order to be approved. Lenders are always concerned about risk potential; if you have an irregular and/or low income, then your risk increases. This means that your application will need to be more robust in other areas.
Newer rules, such as the introduction of Guideline B-20 in 2012, have made it even trickier for freelancers to get a mortgage. This requires banks to look more closely at your income, in addition to your credit scores, when determining whether you should be approved for a mortgage or not. For freelancer professionals, who typically try to lower their incomes as much as possible through deductions, this can definitely complicate things.
2. Get organized
In addition to understanding the potential challenges, it’s also important for self-employed or contract workers to be organized. This means getting your paperwork in order, as well as understanding exactly how much you make. Remember, you will be asked to prove your income to your lender. Ensuring that your invoices, receipts, taxes and other paperwork are accurate and up-to-date means you will quickly and easily be able to provide this proof.
3. Work with a mortgage professional
Although definitely not impossible, getting approved for a mortgage as a freelance professional is not easy. As a result, it’s a good idea to team up with a mortgage professional, such as a mortgage broker, in order to get the job done. A mortgage professional is a good resource because they provide information about the mortgage approval process and answer any questions you may have about being self-employed and how that impacts your ability to get financing. They can also offer alternatives for you to consider, such as getting a co-signer or increasing your down-payment.
Mortgage brokers have developed strong working relationships with a number of different lenders. Working with a mortgage broker provides you with access to these relationships. Quite often, individuals who have previously been denied mortgage approval by a particular lender will be approved by the exact same lender after choosing to work with a mortgage broker.
If you are a freelance, contract, or self-employed professional wondering about your ability to secure mortgage financing, call me today. As an experienced mortgage broker in Barrie, I’ve built solid relationships with many major lenders and have helped people from all professional backgrounds get approved. Connect with me at 705-315-0516 and let’s chat about your options.