There are a lot of people out there who work as freelancers; wedding photographers & videographers, construction workers, and repairmen are just a few examples. Freelancers are in a unique situation when it comes to applying for a mortgage because their income can be inconsistent and hard to verify. That is why we’ve put together this article with information that can help guide you to the best loan option for you. The things you should keep in mind when you’re getting a mortgage are what program to get it through, what lender to get it through, and what type of loan you should get.
Definitely go With the VA Loan Program
Because you’re a freelancer and your income can be inconsistent and impossible to verify, conventional and FHA lenders are either going to refuse to approve you or slap so many extra fees and restrictions on you that you wish they had refused you. The VA loan program is different because the VA itself does not impose any restriction or expectation on income or credit qualifications. It’s up to the lender to make sure that the loan is still marketable, though, so don’t expect it to just be a free ride. However, it’s usually easier from a credit and income standpoint to qualify for a VA loan than for a conventional or FHA, so if you are eligible for the VA loan program, you should plan on getting your loan through it.
Get Your Loan with Low VA Rates
Not to blow our own horn, here, but we’re one of the only lenders that does not have a minimum credit score requirement. Granted, if your credit is in the mid-500s then we’ll need to closely examine your credit history, but our decision is mostly based on the credit history rather than just the score. We aren’t promising that we’ll approve you, but if you’re a freelancer and have an inconsistent income, we are going to be much more likely to get you approved than another lender. We are very willing to look at compensating factors and evaluate whether you are really able to afford the loan even under extenuating circumstances such as irregular income or a lack of paper trail evidencing your paychecks.
Start with a VA Hybrid ARM and Go From There
Why? Because a VA hybrid ARM is going to start you out at a much lower rate, which makes your monthly payment much lower, which makes it easier to qualify for. Also, the nice thing about being a freelancer is that you have a fairly good reassurance that 5 years from now you’ll be better off than you are right now. Either you continue freelancing and your clientele grows, or you don’t make enough freelancing so you find a job working for someone else. In the former situation, your income will definitely go up, and in the latter situation, your paycheck is more reliable and friendly to mortgages, and your income may also go up. Another tip to keep in mind is to keep your monthly payment well below 41% of what you consider your average monthly income to be. You want to keep your monthly payment around 25% of your average monthly income so that you never have to worry about not making enough to make your payment.
The temptation here will be to go for a 30-year fixed since it will lower your payment a lot, but what you really should do is simply buy less house and stick with the hybrid ARM or a 15-year fixed.
So, to recap, you want to use the VA loan program to get your loan because it’s going to be friendlier to your credit and income situation than other loan programs. You want to apply for a loan with Low VA Rates because we make a special effort to be understanding of low credit scores and use compensating factors when necessary to help a borrower qualify. You want to at least check out the hybrid ARM to see if it will work for you because it is the most tailor-made to your income situation. And if you have any questions, as always, you can reach out to us on our website or via phone.