Aug 2019
Home buying for creatives and small business owners
1099-er, full-time independent contractor, self-employed worker, small business owner...if you fall under one of these, chances are you are a non-traditional income earner (a W-2 employee.) And you are not alone! In the past 20 years, the number of 1099s has increased over 20%. While the gig economy has created flexibility and independence for workers, it can also take a bit more paperwork to obtain mortgage for homeownership. But that doesn’t mean it isn’t possible to buy a home! You can qualify for the same mortgages that traditional income earners can...or you can go an alternative financing route. We’ve put together a few tips to help prepare you for the process.
Mortgage tips for self-employed workers
Lenders want to make sure your reported income is consistent so you will typically need two years of self-employed tax returns.
Option to add a cosigner to your application to qualify if you don’t have two years of returns. You can qualify off their income to get in the home earlier, then refinance them off once your SE income meets mortgage guidelines.
Writing off all your Meals and Entertainment expenses further decrease the qualifying income since lenders are looking at net income. A good plan is to get two years of returns that shows more income to get the house you want, then go back to writing off more expenses after your purchase.
Talking to a mortgage professional can help you find out where your income needs to be in order to qualify for the house you want.
Other Options
Other loans, like Bank Statement Loans, are great for self-employed buyers that don’t have two years of tax returns or write off too many expenses. Instead of looking at your returns, they look at your deposit income averaged over the past 12 months to qualify you for a loan.
While there are other options for financing a home, rates on these loans tend to be a bit higher than traditional loans. It’s best to sit down with a lender to find out what is the best option for you. If you are curious and have questions about how to choose a lender we can help! Reach out to us and we can connect you with one of our trusted lenders that have the Philly Home Girls seal of approval.
Home Buying with the Neighborhood Opportunity Program
Let’s get this common myth about buying a home out of the way - You don’t need a 20% down payment to buy a home! While conventional mortgages require a 5% minimum down payment, there are additional options for financing your home. For home buyers with low to moderate income (less than $72,000), OR buyers looking to purchase in low or moderate income census tracts (regardless of income) there is the Neighborhood Opportunity Program. With this program, you can put as little as 3% down and pay zero mortgage insurance!
The best part of this program is that there are two ways to qualify. You can use this program to purchase ANYWHERE if your income is less than $72,000, or you can purchase a home in specific areas if your household income is greater than $72,000. What areas in Philadelphia are in low to moderate income census tracts? Nearly all of East Kensington qualifies, along with areas of, Norris Square, Spring Arts, Olde Kensington, Newbold, Point Breeze, Brewerytown, Port Richmond and Germantown. Pockets of West Philly, South Philly, North Philly, and Northeast Philly also qualify.
72K maximum household income limit may change as it is based on 80% of area median income published by HUD for 4-person household.
Neighborhood Opportunity Program offered by Bryn Mawr Trust
Low down payment options – as little as 3%
Discount on closing costs - reduced fees
Minimal reserves – flexible guidelines
Homebuyer education program – helps borrowers prepare for the loan process and homeownership
Seller’s assist up to 6% depending on the loan-to-value
Competitive mortgage rates
No Private Mortgage Insurance required
To find out more and to get prequalified, drop us a line and we’ll introduce you to a lender.
If you missed this round of workshops, don’t worry, there will be more! Sign up to be notified of our upcoming home buying or home selling workshops. Looking for answers ASAP? Our agents will always make time to meet for coffee to chat about your questions and how to get you started on your home search.
How Philly Home Girls can help
Many people think we can only show them properties listed on our website. Not true! As a buyer agent, we can show you any home for sale. Whether it’s a specific location or budget, we’ll set up a custom home search for you so you can be notified when a new qualifying property comes on the market. There are many options out there if you are looking to take advantage of the NOP. For example, in East Kensington, there are currently 48 homes for sale that qualify.
Contact us today to find out more and get started on your search. We look forward to being your in-market leader, expert negotiator, fiduciary advocate, and overall guide through the home buying process.