Landing a mortgage as a freelancer: not just a pipe dream
For freelancers or anyone with a non-traditional flow of income, trying to get a mortgage or even a standard rental lease can often feel like the proverbial deck is stacked against you. Privlo, a Southern California-based startup, is aiming to change that, offering mortgages to "gig economy" workers based not just on net income, but a complex set of factors including retirement savings, tax write-offs, and even social media use. Founders are vague on what social media behavior they look for other than a "healthy lifestyle," but do cite research indicating that Google Chrome users are more likely to pay back loans than people who do their surfing on Internet Explorer. (No word on Safari or Firefox users. Also: We need to get a hold of these studies, but we digress.)
While the company has yet to expand to New York—they're currently offering mortgages in California, Colorado, Idaho, Minnesota, Maryland, Tennessee, Texas, Virginia, and Washington D.C., according to CityLab—that doesn't mean self-employed city dwellers have to stand on the sidelines while others get the chance at building equity. (Per Bloomberg, the startup raised $350 million in debt and $3.8 million in equity last year. As of July 30, 2014, it had underwritten 100 mortgages for about $200,000.)
Besides having plenty of cash on hand—you'll need enough for two years of mortgage and maintenance payments in addition to a 25 percent down payment, as we've written previously—the key is to have documentation showing two years worth of a sufficiently high net come. "We have to be able to document and verify a borrower's income," says Mary Alex Blanton of mortgage lender National Cooperative Bank. "If a client is self employed or freelances, they still must be able to provide two years worth of tax returns."
Julie Teitel, a senior loan officer with Everbank, concurs, noting that banks can still view you as a qualified buyer as long as the numbers add up. "As a freelancer, you might work only half the year, but as long as the net income is there, you can qualify," she says. Unfortunately, you're not likely to get around the baseline requirements—that you make enough money and/or have enough liquid cash to buy in your desired price range. But do ask your mortgage broker about the option to take out a portfolio loan. Since these types of loans stay within an individual bank's portfolio—rather than being sold off to larger entities like Fannie Mae and Freddie Mac which have more staunch, non-negotiable requirements—the terms are often more flexible. And, says Teitel, you're even eligible for the same rates as buyers with more traditional employment.
If you're currently self-employed and hoping to position yourself as a solid buyer sooner rather than later, you can make yourself look appealing to lenders by minimizing or eliminating your debt. Make sure you have multiple lines of credit (and a credit score of at least 680), and start saving every piece of paperwork you think could possibly be pertinent. It's a slog yes, but isn't working from home that much more pleasant when you actually own the place?
Related:
The top hurdles to getting a mortgage—and how to overcome them
Ask an Expert: Buying in a co-op when you're self-employed
The 3-percent-down mortgage you've never heard of that's available in NYC
Does a 15-year or 30-year mortgage make more sense?
