The median price of an existing property sold in March was approximately $329,100, a 17.2 percent increase from March last year, according to a report by CNBC. Homeownership is a dream many people work hard to fulfill. However, purchasing a home seems like a challenge for many paid bloggers because of the irregular workflow that affects their income significantly. Also, bloggers, like other self-employed individuals, have a hard time obtaining home loans.
But as much as the path to homeownership is bumpy, owning a home is still possible if you’re more strategic with your financial planning. It’s also wise to learn about property financing, including the importance of choosing a responsible lender. The last thing you want is delays when it’s time to close a sale. Therefore, spend a considerable amount of time looking for a lender with a track record of approving loans on time. Below are other essential tips for buying a home when you’re a blogger.
Know the obstacles you’ll encounter
Bloggers looking to purchase homes face many challenges, and the most difficult one is the ability to show proof of income. Assuring lenders that you’re able to earn a steady income in the future is even more stressful. But thanks to Freddie Mac and Fannie Mae, you can overcome the challenges of proving your income with ease. These two mortgage companies recently simplified and automated the underwriting procedure for self-employed individuals. This move has made proof of income much less of an obstacle for getting mortgage approval.
Another common obstacle bloggers face when buying a home is tax deductions. Freelancers in the creative industry have a habit of deducting as much as they can for their taxes. While taking advantage of tax write-offs seems ideal, they could lower your home loan approval amount.
Since your taxable income is always lower after deducting qualified expenses, potential lenders will most likely require you to increase your down payment amount. Alternatively, you’ll need to settle for a smaller mortgage amount. Fortunately, you can jump this hurdle by adding your tax deductions like meals, mileage, travel expenses, and home office deductions back into your taxable income.
Understand what mortgage lenders are looking for
During the underwriting process for potential freelance or self-employed borrowers, lenders look into several factors determining your ability to repay a mortgage. This includes how steady your income is, your location, and how stable your blogging business is.
Lenders will also factor in the potential your business has to generate enough income. You’ll also need to provide proof that you’ve been earning a stable income for two years. Doing so will increase your chances of getting approved for a home loan.
If, by chance, your income statements reveal you haven’t been earning much in the past two years, consider waiting for another year. This tactic ensures you have a higher income that will enhance your borrowing capacity. Understanding what mortgage lenders look for when assessing home loan applications is crucial. That’s because you’ll know what’s needed and prepare your paperwork accordingly beforehand.
Prepare your finances
Banks and credit unions consider the variable nature of freelancers’ income as a significant risk. With this in mind, you must work extra hard to convince lenders you’re able to repay a loan within set deadlines. And the best way to do so is to provide detailed financial statements. Remember, your potential lender wants to be sure you won’t default on your loan. Therefore, attach the necessary tax return documents to show you’ve earned income for at least two years. Since bloggers don’t get W-2s forms, make sure you’re using a 1099 form.
You’ll also need to provide debt records because your debt-to-income ratio will help lenders determine if you’re fit for pre-approval. Most lenders will pre-approve your application if your debt-to-income ratio ranges from 36 to 43 percent. If your ratio is higher than the standard range, consider reducing your debt before applying for a home loan.
Don’t forget to list your assets, including 401Ks, bank accounts, IRAs, and other investment accounts. Proof of having many assets can increase your chances of getting a mortgage. But, most importantly, consider increasing your blogging income and pay attention to savings. You want to ensure you have sufficient funds for monthly loan payments when work is low.
Get pre-approved for a mortgage
Getting pre-approved for property financing is crucial when searching for your dream home. This step entails shopping around for home loans with low interest rates. To get low-interest-rate mortgages, you must find a lender that provides various loan options.
That way, you can rest assured of finding a plan that fits your needs and budget. When consulting with lenders about loan options, don’t shy away from discussing your budgeting. This step can help clarify your total house buying budget and how much you can afford to pay a home loan every month.
Since mortgage pre-approval works like a physical test on your financial status, lenders will assess your credit and employment history, debt-to-income ratio, income, and credit score. So, prepare your paperwork in advance and provide accurate details.
Purchasing a home is one of the most significant financial investments you’ll ever make. That’s why it’s crucial to be realistic about the home you can afford and whether it meets your expectations. Budgeting for your home purchase is an excellent place to start as it will help focus on properties within your budget range. Also, given your income and expenditure impact how much you can borrow, consider talking to several lenders in advance.
This trick helps bloggers get clear insights regarding their borrowing capacity, so they adjust their budget accordingly. It also pays to be flexible with your housing options. For instance, if your dream home has a higher price tag than you can afford, opt for a cheaper home. That way, you can build a history of repaying a mortgage, thus increasing your borrowing power when moving to an expensive home.
Buying a home has never been easy, but for bloggers, the process can be more stressful. However, owning a home shouldn’t be complicated if you follow the right tactics. First, organize your tax report to prove your monthly earnings are stable. Next, discuss your home loan and budgeting options with reputable lenders, and then focus on investing in a home you can afford.