Getting a mortgage seems pretty easy if you have a job. It’s a fairly run of the mill process. It’s a general rule of thumb to have been in your job for at least three months, ideally six, and you’ll likely be able to get a deal for what you’re after. Always remember to ensure that you can and do make repayments. Things change if you’re self employed though. It’s a more difficult process but it’s not an impossible one. Here’s a few things to remember if you’re applying for self employed mortgages.
It’s Just A Mortgage
The first thing to say is whilst we refer to them as self employed mortgages, there’s actually no such thing as self employed mortgages. They’re actually just mortgages. The difference being, that when you’re self employed, you’re going to have to run a few extra obstacles on the course to getting one. Again, when you are taking on a mortgage, always remember to ensure that you can and do make repayments.
What Are These Extra Obstacles?
Mortgage companies do give mortgages to self employed people but you likely have to show more documentation. They’ll want you to have evidence of at least two years of tax returns and have been trading in this way for at least three. The more tax years you have under your belt the better as that is proof that you are make payments and they can use this to calculate just how much you can borrow to buy your house. Lenders will also prefer it if you’ve had an accountant be in charge of your books and don’t forget to check your credit history is in as good-a-condition as it can be. All these things will help the lender decide on what they can offer you.
Mortgage Brokers Work
Whilst a lot of people find their own mortgages, a mortgage broker can be worth their weight in gold when you’re self employed. They know which lenders are more likely to lend to self employed people, which will maybe look at those with less than two years of tax returns and even have access to deals us common folk don’t. Of course, you can apply for your own mortgages after doing your own research.
What To Do (& What Not To Do!)
So, in conclusion we want to sum up what you should and shouldn’t be doing when applying for self employed mortgages. Keeping things simple with a few dos and don’ts helps you stay sane and keep stress at bay.
The Dos
- Get your paperwork and record up to date.
- Be true & real about how much you earn & can afford to repay.
- Hire an accountant to help prepare your tax return & accounts.
- Talk to a mortgage broker, they can help.
- Check your credit report. It’s better that you check it before the lender checks it! That way, you can try and improve it.
- Register to vote – lenders use electoral roll data as part of identity checks. If you’re not registered, you’ll not pass checks.
- Contact credit agencies & ask for a notice of ‘disassociation’ from ex partners and those you have previously had joint finances with. Someone who is no longer in your life can actually scupper your chances of a mortgage if you’re still ‘linked’.
- Look at the amount you’re intending to borrow. If you can put an extra few quid to your deposit and borrow slightly less, you’ll likely get a better deal. There are mortgage bands and these are generally round numbers. Put an extra £250 on your deposit and borrow £99,750 instead of £100,000 and you’ll get a better deal.
The Don’ts
- Don’t apply for any credit shortly before applying for a mortgage.
- Missing payments will count against you in your application so don’t miss any repayments on any of your bills.
- Overspending in the months leading up to a mortgage application can go against you. Lenders might ask to see some recent bank statements to check your income against your spending. This helps ensure you can pay back what you’re borrowing. Cut back a little before you apply, be frugal and don’t overspend!
- Every lender won’t offer you a mortgage, don’t expect them to. You’re a niche market being self employed so expected to be treated that way.
- Don’t reapply elsewhere straight away if you are rejected by a lender. Look at the reasons why you’re rejected and see if there is an improvement to make or error to flag up and correct. Failure after failure will count against you.
- Don’t get stressed out about it. Self employed people have been able to get mortgages for years. Yes, it can be difficult but it’s not impossible. You’ll get there!
