Self Employed?
If you’re a self employed individual seeking to secure a mortgage, we’ve compiled an informative list of six valuable tips to assist you in navigating 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 have 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 trying period.
For self employed people, it’s natural to harbour concerns about your prospects for 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 have the capacity to 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
- Consider enlisting the services of a mortgage broker: The journey to homeownership can be intricate, and having an experienced guide by your side can be a game-changer. Brokers bring comprehensive market knowledge to the table, enabling them to present a tailored range of options that suit your unique circumstances.
- Gather two to three years of financial records: Lenders typically require a thorough examination of your financial history spanning the last two to three years. This documentation serves as evidence of your consistent income. In the post-COVID-19 landscape, it’s especially important to demonstrate that your business has rebounded to pre-pandemic levels, instilling confidence in lenders regarding your ability to meet mortgage obligations.
- Organise your financial documentation: Preparing and presenting the necessary documents to substantiate your income is crucial. Remember that the specific documentation required may vary from one lender to another. Being aware of the documents that lenders may request and having them readily available will streamline the application process, saving you valuable time.
- Demonstrate a steady work history: To reassure lenders, showcasing a consistent and reliable work history over time is vital. Additionally, presenting a robust pipeline of upcoming projects can further bolster your credibility as a borrower.
- Enhance your credit score: Boosting your credit score is essential in securing a mortgage. Implementing strategies such as voter registration, timely debt repayment, and maintaining regular payments can contribute positively to your credit score over time.
- Increase your deposit: A larger down payment improves your chances of mortgage approval and signifies to lenders that you are a low-risk borrower. Scrutinise your monthly expenses to identify areas where you can save money for a down payment, and explore the option of fixed-term savings accounts with higher interest rates to expedite your savings goals.
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 less-than-stellar credit rating, take proactive steps to improve it by addressing any outstanding issues.
- Select the Right Lenders: Different mortgage lenders have varying policies and attitudes toward 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 bolster your mortgage application.
- Manage Your Credit Cards Wisely: Responsible credit card management is crucial. Aim to 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, it’s better for your credit score to 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 anticipate receiving a significant sum of money in the near future, 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.
