Modern jobs are not what they used to be. While there are still millions of 9-5 and other steady roles, there are also millions of gig jobs, influencer work, contracting, and other professional paths that do not involve getting the exact same amount of money with every monthly paycheck. The question is: Can this impact your approval for a mortgage?Verify your mortgage eligibility (Feb 25th, 2024)
The mortgage underwriting process was developed over many years of assessing stability over anything else. However, stability is no longer the name of the game. Many people achieve a good living year over year by working multiple roles, using a wide variety of talents, and following demand instead of securing a salaried or steady wage position. While it can be a little more challenging to get a mortgage with an unusual job history, it is possible and is becoming more normal every year.
How an Irregular Job Influences Your Mortgage Approval
For decades, mortgages have been based on predictable income. This is how mortgage underwriting looks out for both borrowers and the bank, by trying to make sure that each homebuyer can afford the house they are investing in and won’t default on the loan. However, fewer and fewer jobs work this way, and many people purposely seek the freedom of gig and contract work.
Many irregular jobholders are officially self-employed, which leads to a whole different ballpark of tax filings and tax return opportunities. Fortunately, showing stability in the long-term can be evaluated even if your month to month checks are not identical or always from the same employer.Verify your mortgage eligibility (Feb 25th, 2024)
What Mortgage Underwriters Look For
While most mortgage lenders would prefer to see a 9-5, what they really need to see is a predictable capacity to make money and an income system that has been working for 2+ years. The three things that mortgage underwriting evaluates for outside of a predictable salary are credit score, income threshold, and long-term income stability.
Good Credit Score
A good credit score reflects your ability to borrow, manage debt, and repay reliably. Financial institutions tend to treat this as your responsibility score, showing that you are capable of handling loans and lines of credit reliably. Building up your credit score can be done no matter what your regular income might look like.
Your bank statements and tax returns should also reflect that you are making the right average amount of money each year, even if your pay may vary by month or season. Tax returns can really help you in proving that your overall income, either from lump contractor sums or multiple gig economy or influencer sources, totals to a lendable amount.Verify your mortgage eligibility (Feb 25th, 2024)
Long-Term Income Stability
Lastly, your tax returns can and should also reflect successful self-employment for at least two years. This shows that whatever your business model might be, it’s working and can, therefore, be predicted to continue providing you income in the future.
Tips to Strengthen Your Mortgage Application
- Build Your Credit Score
- Pay off your debts and credit cards quickly. It can also help to take out small loans and repay them to build a record of reliable loan management. Paying off a car, for example, is a great way to boost your credit score.
- Handle Your Self-Employment Taxes Carefully
- File all your self-employment and contractor taxes carefully. Claim your tax returns and include all of your sources of income. This creates an absolute paper trail of your total financial success.
- Direct All Your Income Into a Central Bank Account
- It can help if all your finances flow through a central point. This makes it easier to show that you are making a fair amount of money altogether, even if you have multiple sources of income.
- Collect Records of Financial Stability
- Create an income and loss statement, get a copy of your self-employed business license, or a letter from a CPA verifying that your business has been operating for at least two years. Multiple supporting documents of your self-employment and financial stability are helpful.
- Outline Your Business Model
- If you have a business model, outline it for your mortgage underwriter. Help them see the pattern of income and expenses so they know how to evaluate your finances in terms of future income and stability.
- Save Up a Bigger Down Payment
- It also always helps to put down a larger down payment+. This reduces the risk taken by your lender and, therefore, makes it easier for them to approve the mortgage as a whole.
Secure Your Home Purchase Today!
We know that the economy and workforce are changing, and we are ready to evolve with it. If you have a stable yet unconventional source of income through contracting, gig work, influencer income, online shops, or other non-salary sources, we understand and can help you with mortgage approval to achieve your dreams of homeownership in the near future. Contact us today to learn more.Show me today's rates (Feb 25th, 2024)