The freelancer life is awesome—most of the time. When you’re a Freelancer to set your own hours and work on your own terms are perks that make the emotional stress and financial uncertainty worth it.
However, when you’re considering buying a home, being a freelancer presents its own set of challenges. Freelancers are notorious for their resourcefulness and ingenuity, and with a few simple tips, these qualities can be useful when preparing to purchase your dream home and saving money.
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Get Organized
When it comes to purchasing a home, one of the most important aspects is being able to prove you make money. Having all your documents in a folder or app can prepare you to act the moment you find the perfect home.
Stay one step ahead of the game by preparing your:
- Tax returns from the past two years
- Government-issued ID
- Bank statements from the past quarter
- Proof of assets (investments, savings, properties, etc.)
Think Long Term
As a freelancer, you probably enjoy your freedom. However, purchasing a home requires a lot of life planning. Despite the initial investment, purchasing a home can actually serve as a financial cushion in the future. When times are tough, you can always rely on your home to provide equity options such as:
- HELOCs: HELOCs (Home Equity Line of Credit) provides cash when you need it, for whatever you need it for. With a HELOC, you won’t be limited in terms of what you use the money for, which is often valued by freelancers. HELOCs also offer financial flexibility and other benefits like low interest rates.
- USDA Loan: USDA home loans are zero-down, low-interest mortgages for low-income Americans who don’t have good enough credit to qualify for standard mortgages. A USDA loan must be used to purchase a home in a defined area, which includes both rural and suburban areas. Speak with a participating lender about applying for a USDA-backed loan. Contact your state’s USDA office if you’re interested in a USDA direct mortgage, home improvement loan, or grant.
- VA Cash Out Refinance: The US Veterans Affairs (VA) agency, provides a level of financial security to current and former service members. Opting for a VA cash out refinance loan means you can turn your investment into cash when you need it (without delays or waiting periods). You can take advantage of this refinancing option even if your original mortgage isn’t part of a VA loan program.
- Second Mortgage: This is a great option for when you need cash while still paying off your first mortgage. Not only will you have access to large sums of equity when the need arises, but you won’t have to restart the amortization schedule on your first loan. Life happens, and having the option of taking out a second mortgage can help you sleep at night, especially as a freelancer whose income can be unstable.
- Reverse Mortgage: If you are age 62 or older you may benefit from a federally insured mortgage for seniors known as the home equity conversion mortgage. This program was introduced in 1989 signed into law by Ronald Reagan and over the years have drawn criticism and have been reformed by FHA. To get an idea of how much money you may qualify for a visit the free calculator and resources available at reversemortgagereviews.org
There’s a Downside to Deductions
As a freelancer, you know the benefits of writing off your overhead business expenses. For tax purposes, writing off expensive purchases and legitimate business costs can save you money, but it also lowers your net income—which can make potential lenders skeptical when it comes time to offer you a loan.
Take stock of your current deductions and consider reducing the amount you write off. Most freelancers write off expenses like:
- Office (or home office) space
- Offices supplies
- Advertising and marketing
- Travel
- Health insurance
- Internet
- Computer hardware and software
- Client meals and meetings
- Online subscription services
Remember: Buying a home doesn’t mean you have to minimize your expenses forever. Reducing your deductions for just two years before purchasing a home can make a significant difference. Once you’ve landed your dream home, you can safely return to writing off all your expenses.
Be Patient
When you started out as a freelancer, you probably didn’t land every client. The same idea goes for purchasing a home, and you might have to kiss a few frogs. Being patient and remember that the benefits of home ownership will eventually prevail, so don’t let the frustrating aspects of purchasing a home deter you from taking the plunge. Take a deep breath, try meditation, or just focus on the bigger picture.
You’re a freelancer who’s beat the odds to successfully live out the lifestyle you’ve always dreamed of. Your perseverance, determination, and work ethic are sure to overcome the obstacles involved in purchasing a home! Use this article as a guide and before you know it, you’ll be on your way to living out your dreams.
