28 Jul I’m self-employed, can I get a mortgage?
When applying for a mortgage it can be quite daunting if you’re self-employed. You may already be aware that there are more obstacles in your way than someone who is employed, for example lenders will ask for more information to back up the income information you provide them with compared to an employed person who has the security of a regular monthly pay-check and their contract/employer to back their application. There is no reason for us to say that you cannot get a mortgage when self-employed, it just may be a longer application process for you to secure one and you’ll need to plan ahead.
If you would like to speak with one of our expert advisers about your options for a mortgage, make sure you get in touch with us via email or call us on 01753 439000.
There are many ways to make your application more attractive to lenders when you are self-employed, here’s our 8 top tips on getting yourself in a good position to apply for a mortgage if you’re self-employed.
Check and monitor your credit score
Make sure you’re reviewing and keeping on top of your credit score, there are apps and you can check it online also. Ensure to make payments for bills on time, check that you’re on the electoral roll at your address and review any credit accounts on file, closing down anything that is old or not required. Check your associations that are logged on file, if you’ve moved or no longer associated with someone you can have them removed from your file. Sometimes something is overlooked by you that could really make a difference.
Be ready to provide 2 or more years proof of income and affordability
Something that you’ll need to do is provide lenders with at least two years of accounts; however, if this is not possible if you can demonstrate that there is incoming work for the foreseeable future you may still be able to get a mortgage approval although your options are likely to be more limited.
Today, lenders will ask to see a lot more proof of your income and affordability if you’re self-employed. Prior to 2014 self-employed people were able to self-certify income and lenders were happy to provide a figure based on the person’s word alone. This changed following the financial crisis that led the Financial Conduct Authority (FCA) to remove self-certification mortgages from the market completely based on it being irresponsible lending, many people used them sensibly; however, there were many people who then became stuck with a product that they could not afford so unfortunately, you’ve got to really prove it to lenders these days.
The review conducted will usually involve seeing certified accounts going back two or more years, evidence of earnings from HMRC in particular the form SA302 which can be printed from your online account with HMRC, and any proof of upcoming work contracts.
If you are a company director they will want proof of dividend payments or retained profits and will look at your share of net profit, salary and dividends. If you are a contractor or freelancer be ready to provide your average income over the last few years, whilst for sole traders they will look at the net profit you’ve made in this time.
Understand how much a lender may approve and why
Lenders tend to agree to 4.5 times a person’s annual income, however being self-employed and now with the extra checks into your income and outgoings means it may change based on you meeting the affordability criteria, so ensure that you’re doing all the right things with money before you apply.
It is a good idea to save as much as possible for a deposit, the more money you are able to put down will give the lender a better range of deals available to you.
Use an online calculator
If you have all of the financial information above ready to go you can use an online mortgage calculator to give yourself an idea of how much you may be able to borrow before applying for a mortgage and this may give you an idea if you need to save a bit more if the outcome you want is likely to be slightly out of your range. It may also help you to understand how much work you need to be doing now to get yourself in a viable position in a few months’ time.
Plan ahead and be on top of your finances
Be smart with your money if you know you are soon to be applying for a mortgage. Keep a good track of your accounts, as self-employed you’ll be having to keep on top of your accounts for tax purposes so you can use this paperwork when applying for your mortgage.
Get an Accountant to help
When a professional prepares your accounts for you it’ll save you time and may help you to ensure that you’re up-to-date with any tax changes. It may cost you a fee however you’ll feel confident in your accounts and a lender is likely to trust the professional, so in turn while it costs a little it makes it easier for you to get a mortgage if you are self-employed.
Enquire with a Mortgage Broker
As mortgage brokers, we take a lot of the hard work out for you. You can do all of the research online, the planning and calculating of your finances and still feel like you’re not sure so it is best to consult an expert if you’re not quite clear on what you’ll be offered. Not only do we provide you with mortgage advice and find the best possible deals for you, we can also help you to make decisions around other finances in your life.
If you would like to speak with one of our expert advisers about your options for applying for self-employed mortgages, make sure you get in touch with us via email or call us on 01753 439000 – you can also follow us on Facebook, Twitter and LinkedIn.