The way we work is changing. And the growth of the Home Jobs By Mom community is proof of this. Freelancing and the gig economy are helping people to claim back their lives. Rather than being chained to a desk for 40+ hours a week, you can build your schedule and work from home.
Working from home, freelancing, building your own business, and telecommuting are just some of the ways you can be present as a parent without giving up your earning potential. It is undoubtedly liberating, but it is not without its pitfalls.
While it may be a huge benefit to your work-life balance, some things can get a lot more difficult when you take control of your career in this way. Getting a mortgage is tough at the best of times, but when your income is sporadic, it can make it more challenging to get on the property ladder.
If you’re hoping to buy a house, remortgage, or purchase a buy-to-let property, there are a few things you will need to consider if you work from home.
Why is it different?
When lenders decide to give you the money for a home, they are primarily concerned with the risk. What is the likelihood that you will be unable to pay them back? This is why lenders ask for a deposit and look for proof of income. They will also look at your credit score and see if you have been able to manage your repayments in the past.
When you work in full-time employment for a company, you have a contract and you are paid a salary. This makes it easier for lenders to decide because they see this type of worker as a lower risk.
When you work from home or run your own business, you might not earn the same amount of money every month. This raises a flag with lenders and makes them worry that you might miss payments if your business goes into decline. This is why work from home moms might have to work a little harder to secure a mortgage.
I’ve been rejected before, should I give up?
A common misconception is that being rejected by one lender will mean that all lenders will turn you down. This isn’t the case. It can be disheartening when your application is denied, but it isn’t the end of the road. Pick yourself up, brush yourself off, and try again.
Some lenders are more switched on to the different ways that people can make a living, including working from home and telecommuting. It might just take a little bit of extra work to find the right lender.
How can I strengthen my application?
Lenders love to see some stability and regularity to your work. This can be hard to achieve when you are starting your own business. Splitting your accounts can be a great way to give the impression that your income is more regular. Have all of your business income paid into a business account, and then pay yourself the same amount every single month.
When lenders ask to see your business accounts, they will be able to know that you are responsible for your income and make the same amount every month. Many lenders will accept applications for mortgages for self-employed with one year’s accounts. This means that you will need to have been working from home or running your own business for at least one year before submitting your application.
Does my credit score matter?
Absolutely! Your credit score is still very valuable, so make sure that you check it regularly and correct any mistakes. A common misconception is that having no credit is better than bad credit because it shows that you’ve never needed to borrow money. Unfortunately, this isn’t the case.
Lenders will want to see that you have been able to borrow money and pay it back. If you’re struggling to build your credit, try taking out a credit card with a low credit limit. You can then use it for a few purchases and then pay it back in full every month.
What else will lenders look for?
In addition to your trading history and credit score, lenders might look for a few other signals to check that you are a trustworthy borrower. They might ask to see evidence of future work contracts, which is one reason that you should get your accounts in order before you start applying.
If you are applying for a mortgage with a partner and you are not the primary earner in the household, you should still make sure that your income is counted. This can help to increase the amount of money you can borrow. The best way to do this is to work with a lender that understands your different income sources.
And finally, one of the best ways to ensure that you can secure a mortgage as a work from home mom is to save a large deposit. By offering a larger deposit, you can minimize the risk to the lender because you will be asking to borrow less money. In general, a deposit of around 20% should serve you well.
While you might have to jump through a few more hoops, getting a mortgage while working from home isn’t impossible. Start by doing your research and finding a lender that is business owner friendly. Next up, you should keep an eye on your credit score while saving for a reasonable deposit. And finally, get your accounts in order so that you can demonstrate that you have a regular and reliable income.