As an independent contractor, you already know a thing or two about taking matters into your own hands. Maybe you own a small business, work solo as a single-member LLC, or hand-craft a patchwork income on the gig economy.
No matter what your approach looks like, you definitely know how to hustle — so navigating a competitive housing market should be a breeze. You might, however, have some questions about the home loan process. You don’t have a regular paycheck to offer as proof of income, so how do you qualify for a mortgage?
Fortunately, the answer is: just like everyone else. (Kind of.) So long as you have demonstrable and reliable income, as well as the other markers of financial stability required by home lenders, you should still be able to qualify for a mortgage as an independent contractor — if at slightly higher interest rates and with a larger minimum down payment. Your paperwork might look a little different, however.
Let’s take a closer look.
Where can self-employed borrowers find home loans?
Here’s some good news: even as an independent contractor, you don’t have to go looking for a special lender to offer you a mortgage. If you have the right credentials (namely, an established work history with significant income), you should be able to qualify for whatever home loan you choose, be it an FHA loan, VA loan, or conventional mortgage.
It all comes down to that “if.” As with most borrowers, your loan officer will be looking at financial markers like your credit score, full credit report, debt-to-income ratio (DTI), and down payment amount as part of the underwriting process. They’ll want to verify your monthly income, too. However, since you probably don’t have W-2 pay stubs to offer, you’ll need to provide different documentation proving your taxable income.
What information will I need to supply my home lender as an independent contractor?
To qualify for a home loan as an independent contractor, you’ll likely need to prove you’ve been earning a substantial income in the same field for at least two years (or one year of freelance preceded by two years at a “normal” job in the same industry). To verify this, you’ll likely need to provide two years of tax returns, and may also be called upon for copies of your bank statements.
Although applying for a mortgage may seem like a lot of work, your lender is simply doing their due diligence to ensure you’ll be able to afford the monthly payments on your loan program. A home loan is often in the six-figure range, which is a lot of money to front for a borrower: of course they’re invested in determining how much of a risk you might pose!
That said, choosing the right lender can make all the difference when it comes to successfully qualifying as a borrower with irregular income. Some mortgage lenders specialize in working with non-traditional applicants, including independent contractors as well as foreign nationals, small business owners, low-income families and others who may have trouble qualifying at some banks.
Quontic, for one, is committed to helping non-traditional borrowers get their hands on the financial goods and services they need to meet their goals. As one of only 3% of U.S. banks with a CDFI, or Community Development Financial Institutions, certification, we’re driven by a mission to support economically disadvantaged communities, and we’re passionate about providing high-quality loans to worthy borrowers who might otherwise get overlooked.
If you’re an independent contractor on the hunt for a home loan, you might consider our Community Development Loan, or CDL, which is specifically designed for borrowers with good credit and a significant down payment, but inconsistent income. We have other loan options to consider, too, and accept a wide range of income documentation as part of our mortgage loan application process. Whether you’re a first-time homebuyer or a homeowner looking to refinance existing real estate, we’ll look at your finances holistically in a simple, seamless process — and hopefully get the keys to your dream home (and dream home loan!) in your hands.
Still have questions? Don’t hesitate to reach out to our mortgage specialists for answers!
Quontic Bank is not affiliated with or acting on behalf of or at the direction of Federal Housing Authority (FHA) or any government agency or government sponsored entity. All lending products are subject to approval. Rates, program terms & conditions are subject to change without notice. Not all products are available in all states or for all amounts. This does not represent an offer to enter into a loan agreement. Other requirements, restrictions & limitations apply. Information is accurate as of February 8, 2022 & is subject to change without notice.