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How to Buy in Brooklyn (Even As a Freelancer)

Plenty of us have been moving to freelancing in the last few years (whether by choice or not) and COVID-19’s abrupt closure of most workplaces forced many of us to get up to speed on working from home, fast. But whether you’re a freelancer for life, dipping a toe in, or making the best of things right now, it’s important to understand your options when it comes to freelancing and buying a home.

Many people wrongly assume the two are incompatible but we’ve helped plenty of people over the years whose work falls under the banner of freelancing or those whose income is variable. Artists, hair stylists, actors, musicians, backstage professionals, bartenders, playwrights, servers, and many more have all dealt with this issue. 

But it can be done. We’ll give you some tips below but this is one of the few times we’ll use this space to toot our own horn. One of the best resources you can have as a potential home buyer is connecting with an agent who can effectively tell your story and contextualize it for others. Remember, we’re a small business (hello, variable income!) whose agents and support staff are also artists, writers, and theater producers. We get it. (Toot over)

Now, let’s look at what else you’ll want to keep in mind.

You’ll Have to Prove Your Worth 

This means you’ll have to be prepared to share at least two years of tax returns to offer an overall idea of your earnings. If you’ve not had a great few years on paper, but know that you’re still in a solid position to buy, you may want to consider asking for a co-signer. In this situation, it’s your co-signer’s income that the loan approval will be based on. Obviously, this is a big ask—one typically asked of family members—because your co-signer is every bit as liable for the loan amount as you are because as a co-signer, they have legally agreed to assume payments if you cannot. 

Save As Much As You Can

This one’s a bit of a no-brainer—of course you know you have to save a lot to buy a home. But a solid foundation of savings can do a lot to buoy your overall prospects for loan approval, particularly if you had years where your income was uncharacteristically low. 

Plan Your Tax Deductions Strategically 

An accountant who can help you make smart work-related deductions is invaluable for tax time, but lots of deductions mean less income (at least on paper). If you know you plan on buying a house in the next few years, plan ahead to balance these two competing interests as deftly as you can. 

Separation of Home and Work

If you’ve gotten sloppy about the distinction between your personal money and what you use for your business, now is the time to get everything back in shape (not when you’re sitting in the loan office).

Consider the “Stated Income Loan”

This alternative to the traditional mortgage loan allows you to apply using your stated income and not providing as much documentation as a standard mortgage. Since it sounds too good to be true, we have to warn you that these are a little rare but they do happen. Usually, you’ll need a much higher down payment and significant savings to back up your claims.

Come Prepared

Buying a home shouldn’t have to feel like you’re pleading your case to the court but it sometimes does. Plan ahead to get everything in order so it doesn’t feel overwhelming the morning you’re supposed to head to the loan officer’s office. What you’ll want to bring:

  • Last two years of tax returns (often in the form of your Schedule C tax form)
  • Bank statements (they’re looking for red flags like random large deposits of cash that might mean you’re being less than truthful about your income level/source  or lots of  overdraft fees)
  • Year-to-date profit and loss statements
  • Business license from last two years
  • A written or verbal verification of employment from your tax preparer
  • Possibly other proof of your services, like letters from clients verifying you’ve worked for them

We said it wouldn’t be easy but we promise it is possible to buy as a freelancer. If you’d like to chat about your situation and get your questions answered, please reach out.

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