Getting a Mortgage When You’re Self Employed

How to get a mortgage when you are self employed

There are quite a lot of myths floating around when it comes to trying to get a mortgage. One of these is that it is incredibly difficult, or even impossible, to be approved if you are self-employed. It might be slightly more challenging to get approved for a mortgage, but there are some steps you can take to improve your chances.Improve your chances of getting accepted for a mortgage when self employed

Would some else be willing to work for the hourly rate you have set? Because the business is your baby, you might be willing to take a pay cut so you can do what you love. It’s unlikely that anyone else will be willing to earn less than their market value though to work for your business. If you needed someone else to do the work for you, does your price allow you to hire someone at the hourly rate they will expect. This is very important if you would like to grow your business and have a team.

It isn’t just a numbers game when it comes down to being approved for a mortgage, a lender will look at a wide range of factors before accepting you.

Here are some of the key things you can do to improve your chances:

  • Check your credit score and improve
  • Make sure you’re on the electoral roll
  • Stay well away from payday loans
  • Be careful with your credit card – don’t let it hit its maximum, but also be sure to pay off more than the minimum each month.

Who can help you get a mortgage?

A mortgage adviser will be able to help you with the process of buying a home. If you feel like you don’t earn enough or haven’t been trading long enough to be approved, the best thing to do is speak to a good mortgage adviser to weigh up your options.

If you struggle to get accepted by mainstream lenders, you might benefit from getting the help of a specialist broker. They will have experience in your exact situation and know how to go about negotiating with banks and building societies to find one who is willing to offer a good rate to a self-employed borrower. If you need help finding a mortgage advisor, we can recommend a couple.

What will you need to apply for a mortgage?

The main issue with getting approved for a mortgage while self-employed is regarding proof of income. As self-employment naturally has fluctuating income, you will need to show consistency in your finances in order for the lender to approve you.

If you are self-employed then a 5% deposit might not be enough to secure a mortgage. A larger deposit is a start but you’ll likely have to provide a fair bit of additional information.

A quick breakdown of what you might need can be seen below:

  • Sole trader – you’ll need one year of finalised accounts or an SA302 dated less than 18 months from HMRC
  • Limited companies – if you are the director, you will have to provide your latest accounts as well as your personal tax return
  • Contractors/Freelancers – If you are working as a regular contractor you will need to supply your current contract as well as your financial records.

However, these are minimum requirements. In most cases, lenders will prefer up to three year’s worth of accounts to show.

You’ll also need to make sure that you have all the relevant documents at hand when applying.

These can include the following:

  • Proof of ID
  • Proof of address
  • Personal tax returns
  • Bank statements

Finding out halfway through the process that you are missing vital information will only slow the process down, likely costing you more money in the meantime. Make sure you do your research and get professional advice if you’re unsure of anything. Being rejected for a mortgage can end up becoming a problem on your credit record if you’re not careful, which can harm your chances in the future!

Toni Sculthorpe
Toni Sculthorpe

"Hi, I'm Toni, Director of JMC Accountancy Ltd. I was inspired to set up JMC after many years as an accountant and director with other firms. I wanted to do things differently and establish a modern, proactive team of accountants - one that small businesses need and deserve. Our ethos is built around really getting to know our clients and their businesses. We are not just here to make the numbers add up - we act as their business partner and take an active role in helping them to achieve their ambitions."

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