The Catch-22 for Freelance Workers Trying to Buy Homes

"And freelancers appear to make less than their W-2 counterparts, as their up-front income doesn’t reflect the business deductions that will lower their taxes later."

This line makes no sense at all. Almost all freelancers will appear to make MORE than their W-2 couterparts and it isn't until you factor in payroll taxes and things like retirement/healthcare benefits that you figure out what a freelancer actually makes.

While my experience might not be typical, 25+ years of chasing work (strongly) suggests that purchasing a house is NOT a good thing to do if you cannot change jobs without changing locations. Otherwise, getting laid off mean selling your house at short notice, often in a declining market, ...

So, if you are highly sought after in the valley, or Austin or some other secure technical area, go for it. Otherwise, keep the strengths and weaknesses in mind as tenants.

I guess banks are doing all they can to try to ensure that people won't end up defaulting on their home mortgages. If only they had been strict from the start with their requirements rather than giving loans out so readily five years ago. That could have stopped a lot of the foreclosure problems we are having now in the US.

Now the banks finally choose to crack down, but at the expense of legitimate people who would like to get a home.

I don't see a catch-22, I just see freelance workers having more difficulty than salaried workers. That is, I see no circular dependency (you want to do A, but A requires B, and you can't do B because B requires A).

If freelancers establish an S-corp or LLC and pay themselves regularly using a payroll service it should make it much easier. I have done this since I went independent 5 years ago and it has helped greatly when dealing with banks (I got my mortgage before I went independent though but I would assume it would help with that).

This eliminates the majority of the complaints banks have. The income is well documented and steady, and you can have money in the bank to show them.

This is why we opted to buy a house before we'd saved as much of a down payment as I would have liked. I went (partially) through the mortgage process as a self employed (or homeless, as far as the banks are concerned) individual, and it was a nightmare. I accidentally became employed about a year ago, and we opted to buy a house three months ago to take advantage of the fact that we could land a mortgage without jumping through too many hoops. Even still, I had to show quite a bit of paperwork from my self employed time.

I can now safely lose my job and still have a mortgage.

This is why I want to pay cash for my house.