Are you buying your first home? If you find the process challenging, it’s understandable. After all, no one wants to make an expensive mistake.

It helps then that there are certain advantages first-time homebuyers have. Aside from state programs, tax breaks, and federally backed loans, you could also get down payment assistance.

Of course, to qualify for these, you need to have all the requirements ready, but what does that mean for gig workers? Here, we’ll talk about how you can buy a home if you have a job in the gig economy.

First Things First: What Does the Gig Economy Mean?

Whether you call yourself a freelancer, an independent contractor, or a temporary worker, you distinguish yourself from full-time employees who rarely change positions. This is what the gig economy is all about.

The most common example of this would be online platforms such as Fiverr or TaskRabbit. These websites connect clients with gig workers and vice versa. For businesses, the obvious advantage is they can save money by outsourcing tasks instead of hiring full-time in-house employees.

For freelancers and independent contractors, the benefit is they can work remotely or from home. They’re also free to get as many gigs as they want. 

Despite these benefits, however, you may find the home-buying process even more challenging as a gig worker. If you want to get a mortgage, you have to understand that lenders might have stricter requirements for gig-ers.

Applying for a Mortgage: A Checklist for Gig Workers

It’s good to overprepare when you’re applying for a mortgage loan as a gig-er. To help you do that, here’s a list of tasks to keep in mind. 

1. Check Your Credit

Experts suggest that you should check your credit score every month. This will let you know if there are errors on your report. The earlier you catch these errors, the fewer problems you’ll have down the road when you’re applying for a mortgage. 

To be safe, check both your FICO and VantageScore credit scores. You want to cover your bases as you don’t know which score your lender is going to look at, and don’t worry, checking these numbers is free. 

Should you see any issues, attempt to resolve them asap. As you know, the higher your credit score, the more likely a lender will approve your request for a mortgage loan.

2. Prepare Your Tax Returns

Lenders want to be sure that you can make your mortgage payments. That’s why you need to prepare at least two years of tax returns. 

This is one area where those who have traditional jobs in a company have an edge. Deductions are automatically deducted from their paychecks. Meanwhile, if you’re self-employed you’re in charge of figuring out your tax obligations. 

It’s a good thing then that there are tools you can use to make this task easier. You can use a check stub generator to help you declare your all your business income. Plus there are apps like Scantastic to scan documents or Ask a CPA if you need professional help. 

3. Utilize the Best Ways to Save Money

While you want to do this to avoid PMI or private mortgage insurance, it’s also a general tip for all home buyers. Remember, you’re not just saving for a down payment, you also need money for closing costs. 

One of the easiest ways to do this is to automate your savings, but before then you need to know how much you want to spend on a home. From there, you can estimate when you can afford to buy one.

After knowing your estimated purchase date, you can then calculate how much you’ll need to save per month. The good thing about being a freelancer is you can take on more jobs to make sure you’re earning this amount every month. Of course, it’s always good to make more than less.

4. Get Pre-Approved

Getting pre-approved has many benefits. Home sellers expect their buyers to be pre-approved. This will give you more negotiating powers because a pre-approval letter shows that you have no problems getting financing.

Before you consult with a lender though, make sure you know the difference between pre-qualification and pre-approval. The former tells you how much you can afford to spend on a house, while the latter means your buyer’s credit is good and that you’re pre-approved for a specific loan amount.

That being said, there are 5 things you need to be pre-approved. These are proof of income, proof of assets, good credit, employment verification, and other documentation such as your driver’s license and Social Security Number. 

For employment verification, you’ll need to provide additional documents that show you have a stable income. An example would be a list of projects you’ve lined up for the next two years. This will prove that there’s a demand for the services you’re providing and that making mortgage payments will not be a problem.

5. Do Your Homework

That means you should find out what other things lenders like. For example, do you claim a lot of deductions so your take-home income is bigger? If yes, it’s not a good practice, as lenders could look at this negatively.

Other things to research include your DTI or debt-to-income ratio, as well as the best mortgage rates. Shop around and make sure you’re checking out different lenders. If you only consult with a single lender, you might not be getting the best interest rates possible. 

Ready to Buy Your First Home?

As a worker in the gig economy, don’t let the challenging process of getting a mortgage and buying a home stop you.

Like other things, you have better chances of succeeding if you prepare for it. In your case, try to think like a lender and do what you can to increase your chances of getting approved. Even if you can’t buy a home right away, your efforts will pay off in the future.  For more home-related advice, don’t hesitate to check out our other posts.