The gig economy is booming these days, with as many as 75 million workers participating in it in some shape or form. Often it’s the flexibility that drives people to pursue this type of employment, as opposed to signing up to collect a steady paycheck from a single employer. But all of that freedom comes at a price — a lack of financial stability. Not only can that make budgeting and saving money difficult, but it can also make it tough to qualify for a mortgage when you’re ready to buy a home. If you’re in the market for a mortgage but are a gig worker without a predictable paycheck, you’ll need to work extra hard to get approved. Here’s what to do. 1. Be prepared to offer up proof of income When you’re a salaried worker, proving that you earn enough money to keep up with your mortgage is easy — you just show prospective lenders a copy of your pay stubs or W-2 form. When your income is variable, it’s a lot harder to convince mortgage lenders to take a chance on you. But you’re more likely to get approved for a home loan if you show proof that you’ve been earning money steadily for years. To this end, dig up tax returns and 1099 forms (which, if you’re self-employed, you’ll receive from clients you work for who pay you at least $600 a year) from the past several years. If your income varies from month to month but you generally earn, say, $80,000 a year, you can prove that that’s the case by providing your lender with a few years’ worth of income data. 2. Make sure your credit is solid The more trustworthy a borrower you appear to be, the greater your chances of getting approved for a mortgage. This holds true whether you’re applying as a gig worker or a salaried employee. But if you’re in the former situation, you’ll really need strong credit to prove that despite your variable income, you’re able to keep up with your bills. What specific credit score should you aim for? A score between 740 and 799 is considered “very good” by FICO standards , while a score of 800 or above is considered “exceptional.” If your score is lower, it pays to hold off on applying for a mortgage until you’re able to raise it . You can do so by: Paying incoming bills on time. Paying off some of your existing revolving debt (namely, credit card balances). Checking your credit reports for errors (and correcting any mistakes you find). 3. Save for a sizable down payment The more money you put down on your home, the less risk your lender takes on. If you’re able to come up with a down payment of 20% or more, you’ll not only avoid private mortgage insurance , but you’ll also send the message that despite your non-steady income, you clearly have a respectable level of cash reserves. 4. Keep […]
