3 Tips for Freelancers to Apply for a Home Loan
Nowadays, younger generations are increasingly focusing on freelancing or pursuing various forms of independent work, whether as freelancers in different fields or as small business owners. This group, if planning to apply for a home loan, needs to prepare considerably more thoroughly than salaried employees.
Due to their uncertain income or lack of a clear financial history, independent professionals face greater difficulty obtaining loan approvals than salaried employees.
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Housing Types for Freelancers
Before discussing tips for preparing to apply for a home loan, let's look at the types of housing categorized by construction type:
1. Ready-to-Move-in Houses and Condos
Whether it's a detached house, townhouse, or commercial building, most are built before sale or are nearly completed. The down payment period is very short, sometimes less than 3 months, or almost nonexistent.
Similarly, there are many ready-to-move-in condos that are still available, offering a convenient option for those ready to move in immediately. Without a well-prepared financial history, independent professionals have a lower chance of loan approval.
Therefore, independent professionals who don't have a large down payment budget and plan to buy a ready-to-move-in house or condo need to prepare not only the funds but also... You also need to have a good financial history.
2. Houses/Condos Under Construction
Actually, if it's a sale during construction, it's mostly condos rather than houses because condos have a longer construction time, allowing for longer down payment periods—at least 12 months, or even longer for very high-rise buildings, 24-36 months.
This gives you a longer opportunity to build a good financial history and down payment history, which can demonstrate the borrower's financial discipline.
However, this is not the primary factor banks use in their consideration. Income history seems to be the most important factor.
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Tips for Preparing to Apply for a Home Loan
Here are three tips for preparing to apply for a home loan for self-employed individuals:
1. Keep an income ledger.
For self-employed individuals who run their own businesses, buying and selling, or businesses with raw material costs and administrative expenses, it's recommended to keep an income ledger detailing your income, expenses, and estimated profit each month.
This will make your income source appear more credible. If you can prepare this at least 6 or 12 months in advance of applying for a loan, your chances will be much better. 12 months is especially ideal.
Freelancers in creative fields, selling ideas, or writing should also keep detailed records of their income, noting which company provided the payment and how, and maintaining proof of payment from clients.
If the client is a legal entity, they will usually provide documentation. If the client is an individual, a written employment contract can be requested to build credibility.
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2. Bank Account History of Income
This is crucial. A clear bank account history is essential. If income comes in cash, perhaps from cash-based transactions without a bank account, it must be deposited into a bank account consistently.
Daily deposits are ideal, but weekly are acceptable. For larger projects like creative work where payments are monthly, consistent deposits are also recommended.
This income history should be consistent with your recorded income. For example, your income ledger should include a note indicating the date of the deposit.
Another important tip, if your income is in cash... It is recommended to deposit money into a bank account before withdrawing it for personal daily expenses.
Note: For salaried employees working in small companies without payslips or bank statements confirming payment, if receiving cash, the same procedure should be followed: deposit the money regularly into a bank account, preferably before spending it, to ensure the full income is recorded. Receiving payments via bank transfer makes the process easier, as it provides a consistent record of income.
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3. Good Financial History
This is similar to all professions applying for a home loan. It means having no negative financial history, bad credit, outstanding debts, or large existing loan payments at the time of the home loan application. You also shouldn't have a history of continuous spending from credit cards or cash advances.
A good financial history doesn't mean never having borrowed money before. Having some financial history is important; perhaps one or two credit cards (not many) and a history of timely payments on existing purchases reflect financial discipline.
Even if you have no history of bad debt, a complete lack of borrowing history might not be beneficial.
In short, having credit cards and personal loans is acceptable, but a good payment history with no outstanding payments is crucial. Ideally, those personal loans should be fully paid off during the home loan application process to improve your repayment chances.
If you have multiple loan agreements and can't remember them, try recording them in a billing calendar from the Bank of Thailand (available here).
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These are just general tips for self-employed individuals to increase their chances of loan approval. In practice, other factors may play a role, such as the type of business, its stability, and future prospects. Business trends, whether they are upward or downward, etc., should also be considered in this decision-making process.
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Thank you for the valuable information from DD-Property.
