Forget the Myths—Rideshare Drivers Can Get Approved for Home Loans

Having gig income doesn’t mean homeownership is out of reach.

Earning a living as a rideshare driver, food deliverer, or digital gig worker might seem like a roadblock to getting a mortgage, but buying your dream home is absolutely possible with the right approach. While the process might look slightly different from the traditional experience, solutions are tailored for flexible income earners like you.

Digital Gig Work by the Numbers

We’re seeing a steady rise in the number of people earning gig income through digital platforms. A September 2024 survey by the Bank of America Institute estimated that 3.8% of its deposit account holders received income through these platforms. This includes 1.3% working as rideshare drivers, 0.9% as food deliverers, 1.4% earning through social media commerce, and 0.2% via vacation rentals.

Mortgage lenders, anticipating the continued upward trend in digital gig work, are adjusting to better support gig workers’ needs. According to an October 2024 survey by Fannie Mae, lenders expect more gig workers to apply for home loans in the near future.

Why Gig Worker Income Poses Challenges for Mortgages

The hurdles come down to how gig income is reported. Most traditional mortgages are designed for W-2 employees who receive predictable paychecks. Gig workers, on the other hand, receive income documented through IRS 1099 forms and file taxes using Schedule C, which deducts business expenses.

According to Ronald Cofone, sales manager for Affinity Federal Credit Union in Bayville, New Jersey, this reliance on net profits (after expenses) creates issues. “We can only use the income they’ve claimed on their tax returns for qualifying purposes,” Cofone explains. For many gig workers, deductions lead to a lower reported income, reducing their borrowing power compared to their actual earnings.

The Solution? Non-Qualified Mortgages

Thankfully, a solution exists for gig workers who don’t fit the traditional lending mold. Non-qualified mortgages (non-QM loans) are specifically designed to support borrowers with unique financial situations.

Unlike conventional loans, non-QM lenders don’t rely solely on tax returns to verify income. Instead, they often use 1099 forms or bank statements to analyze cash flow and establish the ability to repay. “The goal is to measure your cash flow to document that ability to repay,” says Tom Hutchens, president of Angel Oak Mortgage Solutions, a leading non-QM lender based in Atlanta.

Non-QM loans offer more flexibility but may come with higher interest rates and require bigger down payments than traditional mortgages. Despite this, they are a legitimate alternative for gig workers. Larry Maitlin, director of national non-agency lending for Luxury Mortgage in Stamford, Connecticut, adds, “What’s powerful about non-QM is that we have solutions that are creative for gig workers, for example, that don’t fit the traditional box.”

Consistency is Key

Non-QM lenders tend to favor borrowers with steady income patterns over fluctuating earnings. “It does get tricky if someone works for a month and then has income, and then doesn’t for a couple more months,” Hutchens notes.

However, gig work doesn’t need to be your only income source. Lenders like Angel Oak are used to working with cases where gig work supplements a primary job, while others like Luxury Mortgage focus more on fully self-employed borrowers.

Steps to Apply for a Non-QM Loan

If you’re ready to take the plunge, here’s how you can improve your chances of securing a home loan with gig income:

1. Find the Right Lender

Non-QM loans are often unavailable through traditional banks. Instead, work with a mortgage broker who can help match your situation to the best lender and loan product.

2. Show Consistent Income

Aim to demonstrate at least two years of steady gig income, documented through 1099 forms. Some lenders might accept one year, but two is better. You’ll also need to provide a year-to-date profit-and-loss (P&L) statement showing consistency with previous years’ earnings.

3. Keep Bank Records Organized

Many lenders will request bank statements instead of relying on tax returns. Make things easier by using a separate bank account for all your gig income, especially if it supplements other earnings.

4. Maintain Good Credit

Decent credit is essential for qualifying for any mortgage, including non-QM loans. Keeping up with on-time rent payments is also critical. Use methods with a clear paper trail, such as checks, Venmo, or Zelle, to document your history of timely payments.

Gig Workers Can Become Homeowners

“Following these guidelines, you might qualify for a mortgage using your gig income,” Maitlin explains. By taking the extra steps to maintain consistent income records, organize your finances, and work with the right lender, gig workers can bridge the so-called “gap” created by non-traditional income.

Source: Nerd Wallet