Your Essential Guide
There is so much mortgage advice for first time buyers out there—but what if you are self-employed? There’s a common misconception that self-employed people can’t get a mortgage, but that’s not true at all. Here’s what you need to do to increase your chances of being approved and taking one step closer to owning your own home.
Take a Close Look at Your Income
Lenders look for stability in your income. As a self-employed individual, you’ll need to demonstrate consistent earnings over a period of at least two years. So, it’s time to gather your tax returns, profit and loss statements, and any other relevant financial documents. These will be crucial in proving your income stability to a lender.
Improve Your Credit Score
Your credit score plays a significant part in getting approved for a mortgage. Make sure to check your credit report for any inaccuracies and resolve them. Then, do your best to pay off outstanding debts as much as you can. You should also void new credit applications and maintain a low credit utilisation rate. A good credit score will make you a more attractive borrower, which is vital if you are self-employed.
Documenting Your Income
When you are self-employed, a lender requires a thorough documentation of your income to ensure that you are being honest about your earnings. This often includes two or more years of certified accounts, and SA302 forms or a tax year overview from HMRC for the last two to three years.
Just like with any other applicant, you will provide your passport or driving licence to prove your identity, along with recent utility bills for proof of address. You’ll also have to show bank statements for the previous three to six months, and be prepared for a lender to ask about your spending habits. If it is not shown on your bank statements, you will need to provide evidence of deposit money.
Hire an Accountant
Working with a qualified accountant can be invaluable. They can help you prepare accurate financial statements and offer advice on presenting your income in the best possible light. An accountant’s expertise can make your application more credible to lenders, so we recommend having any documentation of your income prepared by a qualified team.
Working with a Mortgage Broker
Working with a mortgage broker is a great move for any first-time buyer. They have extensive knowledge of the mortgage market and can guide you through the process. They will be able to tell you what lenders are looking for, allowing you to gather all the correct documents ahead of time. They’ll then handle much of the paperwork and communication with lenders, saving you time and effort. They know which kinds of mortgages are the best bet for self-employed individuals, and having them on board will increase your chances of being approved.
What to Do Next
Securing a mortgage as a self-employed first-time buyer may require extra effort, but it’s not impossible! Why not get in touch with an experienced broker today to see where you stand?
