Real estate and construction financing for the self-employed
When buying an apartment or building a house, there are many costs involved. Only rarely do property buyers have sufficient liquid funds to cover the purchase completely with their own capital. This is where real estate financing comes into play, which is granted by banks and credit institutions. However, the self-employed and freelancers often face a number of hurdles, as banks are less likely to grant them a loan due to their income situation, which is not always secure. However, freelancers also have the opportunity to obtain a loan to build or buy a house and benefit from favorable conditions. Please note the requirements for the application process.
Special features for the self-employed
The self-employed and freelancers have a more difficult time applying for a real estate loan than employees. While the latter only have to prove their income situation via their salary statements and tax assessments, the self-employed are required to provide significantly more documentation. The peculiarity lies in the fluctuating income situation, which is why lenders want a comprehensive basis on which to assess the income situation. Those who can prove a high and stable income have a better chance of obtaining a loan. However, not every bank will grant a building loan for the self-employed – so it is important to obtain various offers beforehand. In addition, the repayment interest on a construction loan for the self-employed is usually higher due to the greater risk involved.
Requirements and opportunities for the self-employed
The first port of call for property buyers is usually their own bank. However, they often only grant a home loan for the self-employed under certain conditions. For example, you must have been self-employed for at least three years. In addition, regular profits and as few debts as possible must be demonstrated. The chances of obtaining a home loan for the self-employed are particularly good if there is a spouse with a fixed income or sufficient capital to take out the loan together with the self-employed person. When it comes to income, banks make sure that the amount of income matches the loan amount and that the loan applied for is not too high. In addition, in the case of a real estate loan for the self-employed, proof of impeccable creditworthiness must be provided. This is done via the SCHUFA report. Higher equity also improves the prospects of obtaining a real estate loan for the self-employed.
Documents required for real estate financing
Freelancers must expect more work when applying for a loan. The documents to be submitted for construction financing for the self-employed include the tax assessment notices for the last three years and balance sheets from the same period. Freelancers have to submit the income statement for the last three years instead of the balance sheet. In addition, current figures and data on current business activities are usually required, for example business management evaluations from the past few months. Current business costs must also be presented in writing. You will also need to submit a SCHUFA report. If the documents show a stable and high income, this will have a positive effect on the granting of the loan.
State subsidies for the self-employed
An alternative to the classic property loan for the self-employed is state support and subsidy programs. They make it possible to obtain construction financing even if the requirements are not met and your own bank will not grant a loan. A common choice in this case is a KfW loan, which is granted by the Kreditanstalt für Wiederaufbau. Borrowers receive low-interest loans and one-off grants to promote the purchase of real estate or house construction. KfW does not differentiate between employees and the self-employed when awarding funding. This means that the application terms and conditions generally apply to all applicants. KfW also offers special programs for the self-employed and start-ups, which have particularly favorable conditions and are not repaid immediately. We recommend taking a detailed look at the KfW program, especially for founders who want to take out a real estate loan. In addition to KfW subsidies, some federal states also offer public subsidies for the self-employed.
Self-employed and freelancers, just like employees, can finance the construction or purchase of a house with a real estate loan. However, they must expect greater hurdles when applying, as banks require more documents to apply for a loan due to their uncertain income situation. In addition, property loans for the self-employed often incur higher interest rates due to the increased risk.
Many retail-only banks refuse to lend to the self-employed for property purchases, but there are some that do allow construction financing for freelancers, at least for certain groups. These include savings banks and cooperative banks, for example, which grant home loans to the self-employed in the region in which they are based, subject to certain conditions. The KfW also grants real estate loans to the self-employed.
If self-employed people are unable to obtain a loan from their own bank, they can use a loan broker to obtain offers and accompany the loan process. There is also the option of applying for a loan with several borrowers, taking out a personal loan or obtaining a loan reduction on your own initiative. This so-called “muscle mortgage” is used when some of the material and work involved in building a house is carried out by the owner themselves and the builder does not commission external companies. This reduces the cost of building the house.
Self-employed persons and freelancers must submit significantly more documents when applying for a real estate loan in order to demonstrate their income situation. In addition, certain requirements are linked to the granting of the loan. For example, the entrepreneurial activity must have existed for at least three years. Many banks also only grant loans to self-employed people if they have sufficient equity. This results in higher interest costs.
Banks and credit institutions pay particular attention to the pre-tax profit of self-employed people. If this is subject to few fluctuations and tends to increase, this improves the chances of obtaining a loan. An average value is usually calculated for the last three years. For this purpose, sectors are assessed differently. Doctors or lawyers usually have significantly fewer problems obtaining real estate financing than craftsmen or restaurateurs.
