How to Buy a Home When You Don’t Have Stable Income


If you don’t have a steady income because you work as a freelancer or a contractor then it can be harder to get a mortgage, but it’s still a possibility.

Start to Get Organized

You need to begin by getting your paperwork together. You will need to have copies of federal tax returns and a profit and loss statement.

You will need to have your debt information, including your credit card, student loans, and car loans, along with any assets you have, such as savings accounts, bonds, stocks, and other securities. Lenders will review two years’ worth of income.

Since you don’t have a stable income you may be required to provide more documentation than you would if you had a typical day job. Start preparing in advance to make the process easier.

Separate Business and Personal Expenses

Have a separate business bank account and don’t use your personal account toward your business. This can help lenders track your deposits, which can prove your business income.

Keeping Saving for the Down Payment

Having a bigger down payment will mean you have a lower loan-to-value ratio. The value is the relationship between the value of your property and the amount on the loan. The lower the ratio is, the less risk you are as a borrower.

Pay Down Debt

Start working to eliminate as much debt as possible. Having lower debt will reduce your debt-to-income ratio. This ratio measures the ability to manage your monthly mortgage payments and still repay debts.

The lower your ratio is, the less risk you are when it comes to repaying the loan. When you repay all your debts on time, it’s a key factor in keeping your credit score healthy and high, which is also important for obtaining a home loan.

Consider Other Loan Options or FHA Streamline

Some mortgages have more forgiving guidelines than others when it comes to income. An FHA loan is a mortgage that is insured by the Federal Housing Administration and is designed for low- to moderate-income home buyers.

This loan doesn’t require a large down payment and you don’t need to have as high of a credit score as you would with a conventional loan. If you do save for your down payment and pay down debt, you may be able to qualify for a conventional mortgage, but the FHA loan option is also there for you.

FHA streamline refinance is a program for those with an existing FHA loan to refinance with no income verification, credit check, or appraisal. Those who use this process can be refunded part of the original mortgage insurance.

If you have to get an FHA loan due to your unstable income but worry about the mortgage insurance requirement, there are options with an FHA streamline mortgage.

Use a Co-Borrower

There is also the option of using a co-borrower. The extra, more steady income will allow you qualify for a bigger mortgage. A co-borrower can be an occupant or non-occupant of the home.

Lenders can put restrictions on non-occupant co-borrowers, such as a higher down payment requirement, but a government loan can come with fewer restrictions.