Getting a mortgage in the gig economy

The way people work today looks much different than ever before. Over the last decade, more and more professionals earn a living as freelancers, entrepreneurs, independent contractors, consultants and gig workers. Between side hustles and multiple income streams, there’s a world of possibilities beyond the typical 9-5.

While these career paths offer flexibility, opportunity and freedom, they don’t always align with the traditional mortgage process. When it comes to buying a home, today’s lending landscape has evolved alongside the new workforce.

Whether you’re paid through a W-2, receive 1099 income or have a more complex financial picture, our Loan Officers help support homebuyers from all employment backgrounds. Let’s look at a few best practices for getting a mortgage in the gig economy.

The basics: Who are the gig workers?

The gig economy consists of a wide range of workers who are commonly considered self-employed. From freelancers to part-time employees, here are a few examples:

Gig worker examples

• Freelance writer
• Content creator
• Consultant
• Small business owner
• Real estate agent
• Software developer
• Day trader
• Virtual assistant
• Uber/Lyft driver
• Web developer
• Video editor
• Personal chef

Regardless of how they earn a living, many gig workers build successful careers and generate enough income to achieve their homeownership goals.

Adjusting to a new reality: How today’s lending process supports modern careers 

A different income doesn’t mean a different dream. In the past, self-employed borrowers struggled to fit into the box of traditional mortgage requirements.

But today’s mortgage options accommodate a wider range of income sources. Modern lending solutions recognize that qualified buyers earn income in many different ways. Rather than relying on a W-2 alone, lenders accept additional documents from gig workers to better understand their overall financial picture.

Whether you’re a freelancer, business owner or independent contractor, working with our Loan Officers can help you find financing that fits your unique needs and circumstances. Rate offers a variety of solutions, including Rate Portfolio loans, designed to help buyers with diverse income sources get a mortgage.

How to navigate mortgages with a self-employed income 

Getting a mortgage in the gig economy may add a few additional steps to the process, but it doesn’t have to feel difficult or overwhelming. Because buying a home with self-employed income doesn’t follow traditional paycheck requirements, lenders often request additional documentation to assess your ability to pay the loan.

Like many things in life, preparation is the key to success. Working with the right lender, organizing your financial records, knowing what you need and getting preapproved early on can help you move through the process with greater confidence.

Start with pre-approval

Pre-approval is one of the smartest first steps you can make when approaching the homebuying journey. This process gives you a head start while your lender reviews your income, assets, credit and overall financial situation to determine how much you may qualify to borrow.

If everything checks out okay, you’ll receive a preapproval letter. Buyers use this to show sellers they’re serious and have the financial backing to move forward. In some cases, it’s one of the strongest tools you can use when you start touring homes and speaking with sellers.

For self-employed buyers, here’s what you’ll need to provide when getting a mortgage in the gig economy: 

1. 1099 forms

Independent contractors and freelancers typically receive at least one 1099 form. Lenders use these official tax forms to verify your income. As a best practice, keep these records organized and easy to reach.

In addition to your 1099, your lender may also ask for your bank statements or business records. Be prepared to present them to keep things moving.

2. Full tax returns

Lenders commonly also request at least one year of tax returns to get a handle on your income history. 

Although this request may feel tedious, providing accurate, detailed documentation works in your favor. It’s your chance to show underwriters what you typically earn over time, which they can use to predict your future earnings and assess your qualifications. 

3. Credit score

Your credit score plays an important role in the mortgage process, regardless of how you make your money. A strong credit history can open doors, strengthen your overall mortgage application and speak to the prudent financial decisions you’ve made over the years. 

4. Debt-to-income ratio

Lastly, lenders look at your debt-to-income ratio (DTI). Essentially, this takes your recurring monthly debts and divides them by your gross monthly income. 

If you have a DTI below 40%, you should be in good shape. But a higher DTI (let’s say 50%) could be an indicator that now’s not the best time to buy. The quicker you can pay down existing debts, the more income you’ll free up — turning you into a winning candidate for mortgage approval. 

Additional strategies for gig workers & mortgages

Even if your income looks different than a traditional W-2 employee, there are steps you can take to strengthen your mortgage application. 

One of the most effective ways to qualify for a loan is to save up for a larger down payment. Going above the 20% baseline benefits you in the long run by reducing your principal and showing your lender that you’re able to wield upfront purchasing power. 

This is one of the best ways you can offset concerns about small gaps in employment history, 1099s and year-to-year income variations. Plus, it may even reduce your monthly mortgage payment amount. 

Qualified income challenges and solutions

If you’re a self-employed borrower and you don’t feel like you fit into the traditional lending guidelines, Rate can help you think outside of the box. 

We offer a variety of mortgage solutions designed to help qualified buyers with diverse income sources and employment backgrounds. In addition to conventional loans, eligible borrowers may also benefit from our Rate Portfolio loan options, which are often great fits for gig workers, business owners and entrepreneurs. 

Our Loan Officers may also suggest RateFi, which allows buyers to use select cryptocurrencies and stablecoins in mortgage qualification. If you’re a crypto investor, it’s a great way to access traditional home mortgage lending. 

Financial solutions that grow with you

All in all, buying a home is just one milestone on your lifelong financial journey. Working with an experienced, trusted Loan Officer is the best way to identify financing options that align with your unique situation. 

As your needs evolve, Rate’s solutions support homeowners beyond closing. Whether you’re buying your first home or planning for what’s next, having access to the right financial tools and advice helps you maximize your investment.

Your best ally in getting a mortgage: Planning ahead

No matter how you earn a living, preparation is key to simplifying the mortgage process. Here are a few tips to keep in mind: 

• Planning is everything. 
• Have everything lined up and organized.
• Check your credit score regularly. 
• Prioritize both saving for the down payment and paying down debts.

Most importantly, work with a lender who understands today’s workforce and is ready to help you achieve your goals. Our Loan Officers are experienced with helping buyers from all employment backgrounds. 

Ready to find a solution that fits your unique financing picture? We’re here to help you get a mortgage in the gig economy. Get in touch with our Loan Officers.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply. 

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate. Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.