Jeff Stearman's Blog
As the workforce changes and a growing number of companies seek out contractors and freelancers, many Americans find themselves in a gray area when it comes to their income. They may put in full-time hours, but on their taxes they work for themselves.
Mortgage lenders are cautious about who they lend to. They want to make sure you are a low-risk investment who has reliable, predictable income to ensure that they’ll earn money off of your loan.
This can sometimes make it difficult for freelancers, contract workers, or the self-employed. Not only might your taxes be unconventional, but your income could vary depending on the time of the year and the amount of business you receive.
It’s easy to see why many people would be anxious about applying for a mortgage under these circumstances. However, if you’re self-employed, there’s no need to worry. You can still get approved for a mortgage at a fair interest rate--you just need to do a bit of work to provide the right documents to your lender.
In this article, we’ll show you what documents and proof of income you’ll likely need and how to present it to a lender to make the process run as smoothly as possible to get you approved for your mortgage. Here’s what you need to do.
Organize your records
Before applying for a mortgage, it’s a good idea to take a look at your record-keeping process. As a self-employed worker, you’re probably already used to tracking your own income. However, this will help the lender analyze your income easier and move the process along more quickly.
Having a master spreadsheet of your dated invoices, paid amounts, and the names of your clients is a good place to start. You’ll also want detailed, easy to read information for your previous employers, landlords, references, and any other information you think will be pertinent.
Next, gather your tax documents for the last three to five years. As a self-employed worker, you likely file a Schedule C (Form 1040) and a Schedule SE. Make sure you have copies of these forms.
Dealing with deductions
Many self-employed workers write off business expenses in their tax returns. Travel expenses, internet, and other costs associated with doing business are all ways to save by reducing your taxable income. Doing so can save you money, but it can also reduce your net income which is what lenders will see when you provide them with your information.
If you’re hoping to get approved for a bigger loan, one solution is to plan your taxes in the year prior to applying for a mortgage. Make fewer deductions than you normally would to increase your net income.
Be ready to clarify
When a mortgage lender is reviewing your information, make sure you are open and available to provide any information that can be helpful to them in considering your application. Being prompt and accurate with your responses will signal to your lender that you are willing to work with them.
If you’re in the market to buy a home, you want to find the perfect place for you and your family. In a seller’s market, the competition can be fierce. As a buyer, you may be under the impression that you need to make the highest offer in order to secure the home of your dreams. The problem is, you may never know what price other people have offered for the same home.
Know Your Budget
First, you should know what kind of a budget you have to work with to buy a home. You probably have done an online search to see what’s out there and what price range the homes you like fall into. You’ll want to go beyond the online search and actually see some of your favorite houses in person because pictures can be deceiving.
Next, you’ll want to do is speak with a lender. This can help you before you even hit the ground running on your home search. A lender can pre-qualify you then work you through the process of pre-approval. This will give you a definitive number to work with when searching for a home. With this number, you’ll know how much you can offer comfortably when you find that house you fall in love with.
Make A List Of Priorities
Finding the “perfect” house usually requires that you make a few compromises along the way. It’s very unlikely that you’ll find one house that gives you everything you want in one place without a bit of imagination. Jot down all of the things about a home that are the most important to you. These items could include:
- The neighborhood
- Big backyard
- Open floor plan
- Number of bedrooms
- Hardwood floors
- The size of the rooms
- Style of the house
- Granite countertops
Whatever is important to you should be on the list. Next, go through the list and see what can be compromised on. There are probably a few luxuries on the list that you could stand to give up in lieu of something else.
Once you find that home you know that you absolutely want to live in, you’re going to want to make an offer. Let your realtor know immediately that you’re interested in the home and they can get to work. Your realtor can help you to make an offer that’s reasonable based on the asking price and your budget. Your offer doesn’t have to be thousands of dollars over the asking price for you to win the bid. There are a couple of strategies that can help you to land the right home even if you’re not stretching your budget to the max.
Showing You’re Serious
Taking steps like being pre-approved and having all of your finances in order can help to give you the upper hand in the house hunt. Sellers don’t want to deal with a buyer who is ultimately going to have issues where the deal will fall through.
The Offer Letter
Writing a letter along with your offer is a great personal touch to help you land the home of your dreams. If a seller knows that the home they have lived in and loved will go to another owner who is going to appreciate and take the same great care of the home, they will be more likely to go with you as a buyer. First, tell the seller a bit about yourself and why you love the home so much. Compliment the landscaping. Tell the seller just how much your kids are going to appreciate living in the home. Don’t be afraid to get too personal when it comes to writing an offer letter to the sellers. They will appreciate honesty and a candid approach in the sometimes all too serious matter of buying a home.
Buying a house should be a worry-free experience. Yet problems may come up that prevent a property buyer from achieving the optimal results. Lucky for you, we're here to help you quickly identify and address various homebuying hurdles.
Now, let's take a look at three tips to help you minimize stress as you navigate the homebuying journey.
1. Plan for the Best- and Worst-Case Scenarios
An informed homebuyer should have no trouble enjoying a worry-free property buying experience. In fact, this buyer will understand the best- and worst-case scenarios and know exactly what to do – even in a stressful homebuying situation.
In the best-case scenario, a homebuyer will instantly find his or her dream house, submit an offer to purchase this residence and receive an immediate "Yes" from a seller. Then, this buyer can finalize a home purchase and move into his or her new residence.
On the other hand, the worst-case scenario likely will force a homebuyer to miss out on the opportunity to acquire his or her ideal residence. This scenario may involve a failure to agree to terms with a seller due to many potential homebuying problems.
Homebuyers will want to do everything they can to avoid the worst-case scenario. Fortunately, if you learn about the housing market, you can gain the insights you need to plan ahead for the property buying journey. And as a result, you can increase the likelihood of finding and buying your dream house in no time at all.
2. Get a Mortgage
Let's face it – purchasing a home is your dream, but you probably don't have the necessary finances to buy a house on your own. Therefore, you may need to get home financing before you can make your homeownership dream come true.
Applying for a mortgage may seem stressful, but lenders are happy to help you in any way they can. If you consult with multiple banks and credit unions, you can review a variety of home financing options.
Don't hesitate to ask questions as you complete a mortgage application too. If you address your mortgage concerns and questions with a home financing professional, you can alleviate the stress commonly associated with applying for a mortgage.
3. Work with a Real Estate Agent
A real estate agent is a homebuying expert who can respond to any concerns or questions that you may have. If you collaborate with a real estate agent, you can get the help you need to minimize stress at each stage of the property buying journey.
Typically, a real estate agent will learn about you and your homebuying goals and help you plan accordingly. He or she will keep you up to date about available houses in your preferred cities and towns and set up home showings. And if you find a house that you want to purchase, a real estate agent will help you submit a competitive property buying proposal.
Remove stress from the homebuying journey – use the aforementioned tips, and you can reap the benefits of a worry-free homebuying experience.
The homebuying journey may seem daunting at first. Lucky for you, we're here to help take the guesswork out of finding and acquiring your dream house.
Now, let's take a look at three tips to help you approach the homebuying journey with poise and confidence.
1. Be Diligent
A diligent homebuyer may be better equipped than others to enjoy a seamless and successful property buying experience. In fact, this buyer likely will do whatever it takes to find the right house at the right price, regardless of the current real estate market's conditions.
To become a diligent homebuyer, it generally is a good idea to learn about the housing market in your preferred cities and towns. With this information, you can determine whether you're pursuing a home in a buyer's or seller's market and plan accordingly.
Furthermore, it may be beneficial to get pre-approved for a mortgage. If you enter the housing market with a mortgage, you'll know exactly how much you can spend to acquire your dream house.
2. Know Where You Want to Go
Establish homebuying criteria – you'll be glad you did. If you know what differentiates your dream house from others, you can quickly and effortlessly search for residences that match your expectations.
Also, you may want to hone your home search to specific cities and towns. For example, if you want to find a house close to your office in the city, you may want to explore residences in or near the city itself. On the other hand, if your goal is to buy a house near the top schools in a particular state, you should narrow your house search based on school rankings and other pertinent data.
3. Work with a Real Estate Agent
Buying a house is no small feat, and ultimately, there is no reason to try to navigate the homebuying journey alone. Thankfully, you can hire a real estate agent who can provide expert support throughout the homebuying journey.
A real estate agent is a must-hire, and for good reason. He or she will guide you along the entire homebuying journey and respond to any of your homebuying concerns and questions. In addition, a real estate agent offers recommendations and suggestions to help you make informed decisions as you pursue your dream residence.
Usually, a real estate agent will learn about your homebuying goals and craft a personalized homebuying strategy for you. He or she next will keep you informed about available residences that meet your criteria and set up home showings. Once you find your dream residence, a real estate agent will help you put together a competitive offer to acquire this house. And if your offer receives a "Yes" from a home seller, a real estate agent will help you finalize your house purchase.
Ready to streamline the homebuying journey? Use the aforementioned tips, and you can kick off a house search and discover your ideal residence in no time at all.
Let's face it – buying a luxury house in Los Angeles, San Francisco or elsewhere in California can be challenging. Fortunately, luxury homebuyers who establish realistic expectations may be better equipped than others to enjoy a quick, seamless homebuying experience.
When it comes to purchasing a luxury home in California, it helps to prepare. That way, you can identify any potential homebuying hurdles and address such issues before they slow you down.
Now, let's take a look at three tips to help you set realistic expectations before you embark on a search for your ideal California luxury residence.
1. Craft a Homebuying Checklist
Searching for a luxury house in Sacramento may prove to be very different from exploring the deluxe houses in Hollywood. However, if you establish a homebuying checklist, you should have no trouble streamlining your luxury house search, regardless of where you want to live in the Golden State.
Also, you should allocate time and resources to figure out precisely where in the Golden State that you want to reside. For instance, if you want to own a luxury house that is close to Rodeo Drive, you may want to focus exclusively on deluxe residences in and around Beverly Hills. Or, if you would prefer to own a luxury house that offers stunning views of the Golden Gate Bridge, you may want to search for luxury residences in the Bay Area.
2. Consider Your Budget
California luxury houses may be expensive, but homebuyers who budget properly can search for residences that fall within a specific price range.
To create a homebuying budget, you may want to meet with various lenders. These financial institutions can teach you everything you need to know about jumbo mortgages and help you get pre-approved for a mortgage. Plus, if you ever have jumbo mortgage questions, lenders are happy to respond to your queries.
3. Work with a Real Estate Agent
Pursuing a luxury home in Malibu, San Diego or any other California city or town may prove to be time-consuming, particularly for those who are entering the Golden State luxury real estate market for the first time. Thankfully, real estate agents are available who can help you establish realistic luxury homebuying expectations. In fact, these housing market professionals will ensure that you can discover your ideal California luxury residence in no time at all.
A California real estate agent with luxury housing market expertise will learn about your homebuying goals. Next, this housing market professional will help you tailor your house search accordingly. This means if you want to find a San Jose luxury residence as quickly as possible, a real estate agent can help you do just that. On the other hand, if your goal is to buy a luxury house that is just minutes from Disneyland, a real estate agent will make it simple for you to discover the ideal Anaheim area luxury house.
Get the help you need to establish realistic expectations for the California luxury homebuying journey – employ a real estate agent, and you can accelerate the process of going from Golden State luxury homebuyer to Golden State luxury homeowner.