Finding a suitable mortgage is stressful enough when you’re in full-time work – so how do you navigate through a mortgage application when you run your own business?
The good news is, it’s not as hard as you may think to get a mortgage when you’re self-employed. Follow these tips to make sure you can find a suitable mortgage – and improve your chances of getting accepted for one, too.
Improve your credit rating as soon as possible
One of the biggest barriers to being accepted for a mortgage is a poor credit rating. This is true of anyone applying for a mortgage, not just the self-employed. The better your credit score is, the more chance you have of lenders agreeing to give you a mortgage.
Here are some quick steps to improve your rating:
- Never miss monthly repayments on credit cards or bills
- Register on the Electoral Roll
- Close any unused credit accounts
- Check your credit file for errors
- Don’t apply for new credit in the months before your mortgage application
Managing your current debts and credit agreements well will make lenders look more favourably on your application.
Prepare three years of accounts
Most mortgage lenders will want to see your last three years of accounts to prove your income. If you’ve only been in business for one or two years, you may still qualify for some mortgages but it could be harder to get accepted.
Copies of your Self Assessment tax returns and any company tax records are a good place to start. You may also want to include future orders, if you have evidence of purchase orders or confirmed payments due on work yet to be completed.
Make sure you can meet monthly payments
As part of your accounts, draw up a budget to make sure you can meet regular mortgage payments. This will help you to understand how much you can afford to borrow, and will show to a lender that you’ve considered your repayments seriously.
Self-employed income often goes up and down, so it always helps to have some savings set aside to cover any unexpectedly dry months.
Ask an accountant to prepare your paperwork
Once you’ve gathered the information about your previous years’ accounts, speak to a chartered accountant. They will be able to check over the paperwork and provide reassurance to a lender that everything stacks up as it should.
You should also be ready to explain – and provide evidence for – any large fluctuations in income over the past three years.
Save a large deposit
The larger your deposit, the less you’ll have to borrow. This means lenders will see you as a lower risk than someone asking for a 90% loan on a fluctuating self-employed income.
Saving a larger deposit also means you’ll be able to have a shorter term mortgage. This could save you thousands of pounds in interest over the years.
Speak to a mortgage adviser
A mortgage adviser will be able to make sure you have everything prepared for your mortgage application to improve your chances of being accepted.
They will also be able to help you to shop around to find the right deal with lenders who provide mortgages to the self-employed. Brokers often have access to deals that aren’t available on the high street, too, so it’s always worth speaking to one before you apply.
Find out more about our Mortgage Advice service in Newcastle