How to get a mortgage if you’re self-employed
According to figures released by the Office for National Statistics (ONS) yesterday 4.6m Brits are now self-employed, an increase of more than 700,000 since the peak of the financial crisis in 2008.
As a growing number of people choose to work past retirement age and a sluggish job market leaves traditional job opportunities thin on the ground, just 23 per cent of people who were self-employed in 2009 have since returned to full employment status.
Despite the rise in self-employment, banks can be reluctant to lend money to those who work for themselves. While challenges do exist – of which proving your income is just one – there are steps the self-employed can take to increase their chances of securing a mortgage.
Charles Haresnape, managing director of mortgages and commercial lending at Aldermore, says:
Do your homework
Before you start the buying process, approach a mortgage lender and find out firstly if you qualify for a mortgage and secondly how much they will be willing to lend you. This will ensure that when you start house hunting, you don’t waste time looking for places that are out of your price range.
Provide as much of your employment track record as possible
Most lenders specify that they need to see three years of income history. Make sure you take along as much evidence of your previous work history, and your self-employed history as possible. This will greatly improve your chances as the lender will be able to make a more informed judgement and this will save you time.
Improve your credit score wherever possible
In the current climate, some lenders will shy away from what look like riskier prospects, and anything you can do to improve your credit score will make your application more attractive. Minimise your debt levels as much as possible before applying, and make sure to keep up-to-date records should you be asked to supply any additional information.
Raise a larger deposit
The smaller the mortgage you are taking out the more likely it is you will qualify for it. Reducing the Loan to Value as much as possible by having a larger deposit is highly advisable.
Have a savings buffer
Having a contingency fund for any obstacles you may face in the future will reassure the lender that you are a responsible prospect.
If in doubt, ask
Applying for a mortgage is a huge commitment and if you have any concerns or are unsure talking to an independent mortgage adviser can be very helpful. Not only can they answer any questions you have about the process, they can save you time as they will be aware of which lenders are most likely to support applications from self-employed workers.