Getting accepted for a mortgage can be a challenge for anyone. But if you are self-employed it could be even more difficult convincing a lender that you are a safe bet.
However, don’t give up. With a little bit of advance planning, it is still possible to get a mortgage if you are self-employed.
What sort of mortgage should I go for if I’m self-employed
There is no such thing as a self-employed mortgage. The mortgage products you can apply for are exactly the same as other buyers who are employed by companies. All that the lender is worried about is your ability to repay the loan, so for self-employed applicants there may be more stringent checks.
What information will I need?
The more financial records you can show to the lender the better. Typically you’ll be required to provide at least two-years worth of accounts. These will usually need to be signed off by an accountant. The lender will expect to see increasing profit over a number of years, or at least a consistent amount of income. If your income varies a great deal, then you may need to provide further evidence of future income such as upcoming, agreed contracts.
If proving your income is problematic, the lender may not agree to your mortgage. Alternatively the lender may ask you to prove that you have significant savings which could help to offset your mortgage.
Can I improve my chances of a mortgage as a self-employed borrower?
Whether you are employed or self-employed, it’s useful to be prepared before applying for a mortgage. However if you are self-employed, extra preparation can go a long way. Here are a few tips to think about:
Use an accountant
Accountants may be expensive but if you want your finances ship-shape for a mortgage application then it’s worth it. And put simply, some lenders will not even consider you for a mortgage if your accounts aren’t signed off by a qualified accountant.
Provide proof of your self-assessment forms
SA302 forms provide annual tax calculations which a mortgage lender will usually ask to see. If you do your self-assessment online then it’s possible to print off these forms. If you file your self-assessment by post, then you’ll need to contact HMRC to obtain copies. This can take a couple of weeks so make sure you do this in plenty of time before you speak to a mortgage lender.
Make sure you have a sizeable deposit
With any house purchase, a larger deposit can typically secure you a good rate for your mortgage. You’ll normally require a deposit of at least 10-20%, however if you are self-employed and don’t have a long history of accounts, it may be wise to offer up a larger deposit. The more money you can put up front means less risk to the lender.
Seek professional mortgage advice
Applying for a mortgage when you are self-employed can be a bit of a minefield, working out exactly what information you’ll need to provide to a lender. If you apply to a lender and you can’t provide enough proof of income or credibility, and you are denied this could damage your credit score, which in turn could impact on your next application.
By speaking to a mortgage broker before you apply, this could improve your chances. A broker will look at your personal circumstances and advise you on the best lenders to apply to.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.