- The bank wants to see a steady stream of income, and so long as you can prove this, you can secure a home loan.
- You should get prequalified before applying for a home loan as a freelancer, and save up for a deposit that’s higher than the average so as to counteract some of the risk.
- Preparing all the necessary documentation will boost your position and give you the best chance of getting home loan approval as a freelancer.
The life of the freelancer is one of insecurity, never knowing where your next pay cheque is going to come from. Or at least, many would have you think. In truth, the life of the freelancer does not preclude securities; not even the ultimate form of security; a home of your own.
While you may have assumed the freelance lifestyle rendered a home purchase untenable, think again. Acquiring a home is a realistic option for the self-employed, especially with the help of a home loan comparison service like ooba Home Loans.
Getting a home loan as a freelancer: What you need
The banks want to see a steady stream of income, and if you have the necessary documents to demonstrate this, your chances of home loan approval will be significantly improved.
Of course, it’s more difficult for a freelancer to achieve this as there’s no single source of consistent income. Your signed income statement and balance sheet, and a letter from your accountant will demonstrate to the bank whether your income and financial balance is sufficient.
Some steps you should take to increase your chances of home loan approval:
Prequalification will give you an idea of what you can afford. This is all the more important when applying for a home loan as a freelancer, as you’ll know in advance whether your various sources of income are enough to get you the home you want.
You can get prequalified online with ooba Home Loans by using their free, online prequalification tool, the Bond Indicator.
Check your credit record
Your credit score will play a primary role in determining whether you can get home loan approval. Check your credit score beforehand so you can get an idea of whether your freelance income stands you in good stead, and whether you have managed your finances responsibly.
Using the ooba Home Loans Bond Indicator will provide you with your credit score. It’s a three-digit number between 000 and 999, with a credit score of above 600 being considered good enough in most cases.
Save up for a deposit
A deposit usually amounts to 10% of the home price, but as a freelancer you may want to push that number up to at least 20%. A higher deposit will compensate for any additional risk the bank may attach to your freelance status.
Prepare your documents
Here’s where the really complicated part comes in. As a freelancer there are a number of documents you should provide when applying for a home loan. Most of them can be provided by your accountant or bookkeeper.
Here are the documents you’ll need:
- A copy of your ID book, or copies of both sides of your ID card
- Written confirmation of income – ie a letter from accountant detailing your income
- Your latest two to three years tax returns (ITa34 from SARS)
- Your latest two years Income Statements and Balance Sheets, signed & dated
- 6 Months latest Personal Bank Statements
- 6 Months latest Business Bank Statements
Apply to multiple banks for the best chance of approval
The banks vary in their lending criteria, and a home loan application that’s rejected at one bank may be approved at another. It helps to employ the services of a home loan comparison service such as ooba Home Loans, which will apply to multiple banks on your behalf so you can compare the deals on offer.
ooba Home Loans also provides a range of tools that make the home-buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
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