The Self-Employed Mortgage Conundrum: How Can YOU Solve it
Post credit crunch, it’s become harder for the self-employed amongst us to get approved on a mortgage. Why? For the simple reason that it’s viewed as risky. Frustrating, right? Your business could be thriving, with regular high income and still you’d have to jump through hoops to get close to a mortgage deal.
The good news is, you can turn the tide. There are some surefire ways to help your case when it comes to the nail biting mortgage application. There is no such thing as a ‘self-employed mortgage’, so you’ll be applying for the same mortgages as regularly employed buyers. As with any mortgage, you’re trying to persuade your lender of your affordability, but the difference with self-employed workers is that you need to show your profit rather than a wage.
Get an Accountant
Simply put, most lenders will want to see your accounts prepared by a Chartered Accountant, so you’ll significantly up your chances of success by doing this (and take away the stress for yourself). Find a local Chartered Account here.
Lenders are looking for 2 or 3 years’ (depending on the lender) of accounts, including tax returns and bank statements. Don’t worry, if you haven’t got 2 years, some lenders will consider you even with only one year’s worth.
Squeaky Clean Credit
This applies for both your personal credit record and your business’s history. It’s the foundation of your financial life, so make sure it’s as clean as possible to support your application.
- Monitor your report regularly to catch anything cropping up (if it’s incorrect you can request it’s removed)
- Close accounts you don’t need
- Get on the electoral roll (if you haven’t already)
- Pay bills on time and keep up to date with loan repayments
A Healthy Deposit
As self-employed buyers are more risky, you’ll have to go the extra mile to prove you’re a safe bet. And as far as deposits go, the bigger the better. With various mortgage options out there, all lenders vary but as a general rule you’re looking at least 10% to secure a mortgage.
A Track Record of Regular Work
Making your case is going to be far easier if you can show that your work is not only regular, but you’re likely to be getting more in the future. Your history will be visible in your accounts, but make sure you include projections for future work (with proof).
Go Through a Mortgage Broker
Having someone on your team who understands the landscape is going to make your life far easier.
Experienced mortgage brokers know how to approach lenders in the best way, they can advise you on everything you need, every step of the way. They can help you get the best rates and will know which lenders are more sympathetic to self-employed applicants. It will not only save your personal time researching and shopping around, but it will cut the time spent on pointless applications with lenders that simply won’t accept you.
Don’t Switch Company Type
Switching from a sole trader to a limited company prior to applying for a mortgage could hinder your success. Why? Well, lenders could view you as changeable and that the progression adds an extra element of uncertainty.
Keep everything in your business as stable as possible in the year leading up to the mortgage application for a higher chance of approval.
Helping You Find a Mortgage That Fits.