Mortgage Options for Freelancers and Gig Workers

Mortgage Options for Freelancers and Gig Workers

In today's evolving workforce landscape, traditional 9-to-5 jobs are no longer the sole means of income for many individuals. Freelancers and gig workers represent a growing segment of the workforce, but they often face unique challenges when it comes to securing a mortgage.

Exploring mortgage options tailored to the needs of freelancers and gig workers is crucial for those seeking to own their homes. In this article, we will delve into some mortgage options specifically designed for this group, supported by examples and studies.

1. Asset-Based Mortgages

Many freelancers have valuable things they can use to get a mortgage. These types of mortgages are called asset-based or collateral-based mortgages. They let borrowers use things like savings accounts, investment portfolios, or even digital money, like cryptocurrency, as a guarantee for the loan. 

For example, think about a freelance graphic designer with a big investment account.  Having a large, accessible asset makes a borrower seem less risky for a lender. In fact, according to a study by the National Association of Realtors, more freelancers are finding asset-based mortgages a good option when they want to become homeowners.

2. Creditworthiness Evaluation

Another vital factor for mortgage approval is creditworthiness. Freelancers and gig workers may experience fluctuations in income, making it essential to maintain a good credit score. Lenders consider credit scores to assess an applicant's ability to repay a loan.

However, some lenders focus on alternative credit scoring models, such as FICO 9 or VantageScore 3.0, which consider factors beyond traditional credit reports. These models incorporate rent payments, utility bills, and other non-traditional data. A study published by the Federal Reserve showed that these alternative scoring models have helped freelancers and gig workers with limited credit history secure mortgages.

3. Non-Qualified Mortgages

Another choice that can help freelancers and gig workers is called non-qualified mortgages, or Non-QM for short. These mortgages don't adhere to the strict rules set by the big government-sponsored organizations like Fannie Mae and Freddie Mac that buy up most mortgages. While they may not come with the same optimal rates and terms, they do offer more flexibility for qualifying for a mortgage.

Let's say there's a freelance writer who gets paid from different sources and their pay dates are inconsistent. For someone like that, Non-QM mortgages might be a good fit. These loans look at the whole picture of your finances, not just one or two things. This makes them a real option for freelancers who don't have the usual financial setup. A report from Inside Mortgage Finance even showed that more people are looking into Non-QM mortgages, showing that more folks want different ways to borrow money for a home.

4. Co-Borrowing and Joint Mortgages

Co-borrowing or applying for a joint mortgage with a partner or family member can also be a viable option for freelancers and gig workers. This approach allows borrowers to combine their income and assets, potentially increasing their chances of mortgage approval.

For instance, a freelance photographer who earns an irregular income might consider applying for a mortgage with their spouse, who has a stable job. Lenders take both incomes and credit histories into account when evaluating joint mortgage applications.

Freelancers and gig workers have unique challenges when it comes to securing a mortgage, but there are options available that cater to their specific needs. From flexible documentation to alternative credit scoring models and asset-based mortgages, these options provide opportunities for freelancers to achieve homeownership. As the workforce continues to evolve, it's crucial for individuals in non-traditional employment to explore these mortgage options and consult with experienced lenders who understand their unique financial situations. Homeownership is not out of reach for freelancers and gig workers, and with the right approach, it can become a reality.

If you're a gig or freelance worker and you'd like to explore your mortgage options - give us a call today!