If you’re a self-employed individual seeking to secure a mortgage, we’ve compiled an informative list of six valuable tips to help you navigate the process.
The COVID-19 pandemic has had a profound and lasting financial impact on self-employed individuals. As the UK gradually reopens after a successful vaccination rollout, many continue to face the arduous task of rebuilding their businesses to pre-pandemic levels. A staggering 51% of self-employed workers in the UK have reported a deterioration in their financial situation over the past year, with 34% of them having sought government assistance and 25% of self-employed homeowners requesting mortgage payment holidays in the last 12 months to make ends meet.
Despite the ongoing economic challenges, our research has unveiled an inspiring level of resilience and adaptability within this sector. An impressive 46% of self-employed individuals have made significant adjustments to their businesses to ensure survival, while 13% have completely overhauled their business strategies during this period.
For self-employed people, it’s natural to harbour concerns about your prospects of purchasing a home in the wake of these challenges. However, there are avenues available to help you realise your homeownership dreams. It is imperative to seek the guidance of a knowledgeable broker with a deep understanding of the market and expertise in exploring specialised lending options. These specialised lenders can delve into the intricacies of an applicant’s income sources, potentially eliminating the conventional obstacles to obtaining a mortgage. By leveraging these resources, you can enhance your chances of securing the financing you need for your future home.
6 top tips if you’re self-employed and looking to get a mortgage
1> Consider enlisting the services of a mortgage broker:
Buying a home can be complex. Having an experienced advisor can make a significant difference. Brokers have in-depth market knowledge and can present tailored options to suit your circumstances.
2> Gather two to three years of financial records:
Lenders usually review your financial history, covering the last two to three years. This evidence demonstrates consistent income. After COVID-19, showing that your business has recovered to pre-pandemic levels is crucial, reassuring lenders of your ability to meet payments.
3> Organise your financial documentation:
Preparing the required documents to prove your income is essential. Requirements may differ between lenders. Preparing all necessary paperwork can simplify the application process and save time.
4> Demonstrate a steady work history:
Showing a consistent work history helps to build confidence with lenders. Highlighting a pipeline of future projects can further strengthen your application.
5> Improve your credit score:
Raising your credit score can help secure a mortgage. Steps such as registering to vote, repaying debts on time, and maintaining regular payments can improve your credit profile.
6> Increase your deposit:
A larger deposit boosts your chances of approval and signals low risk to lenders. Review monthly spending to find savings opportunities. Fixed-term savings accounts with higher interest rates can also help grow your deposit faster.
As self-employed, how can I boost my chances of being accepted?
To increase your chances of being approved for a mortgage when you’re self-employed, consider these key steps:
Check Your Credit Score: Start by reviewing your credit record. A good credit score is crucial for mortgage approval. You can obtain a free credit report from a credit reference agency (CRA). If you have a poor credit rating, address any outstanding issues.
Select the Right Lenders: Different mortgage lenders have varying policies towards self-employed applicants. Some are more accommodating than others. Research and identify lenders known for being sympathetic to self-employed individuals.
Register on the Electoral Roll: Being on the electoral roll can positively impact your credit score. If you’re not already registered, consider doing so to enhance your creditworthiness.
Obtain an SA302 Form: This form provides lenders with concrete evidence of your earnings. You can obtain an SA302 form from HMRC after you’ve filed your self-assessment tax return. Having this documentation can strengthen your mortgage application.
Manage Your Credit Cards Wisely: Responsible credit card management is crucial. Pay more than the minimum required amount each month and avoid reaching your credit limit. If you’re close to maxing out your credit card, your credit score should distribute the debt across two cards rather than maxing out one.
Save for a Larger Deposit: A substantial deposit can open the door to more mortgage options. If you expect to receive a significant sum shortly, consider waiting to accumulate a larger deposit. A larger down payment can make you more eligible for favourable mortgage deals.
By taking these steps, you can improve your financial profile and increase your chances of being approved for a mortgage, even if you are self-employed.
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