Getting a mortgage is one of the most difficult aspects as a self-employed person due to the myths surrounding this particular profession.
It can be easy to feel despondent during these uncertain times, especially if you’re self-employed but we do bring good news; a growing number of lenders are now more open and determined to support more self-employed individuals with their mortgage applications.
Despite this recent development, there are still certain requirements for self-employed individuals to achieve before applying for a mortgage. Just like others, the self-employed must demonstrate a stable income to ascertain that they can repay their mortgage on time. Failure to do so will result in your home being repossessed.
We have compiled a list of tips to ensure that your mortgage applications are hassle-free and successful:
- Check your credit score - it is recommended to check your credit score regularly, especially before applying for a mortgage
- Conduct research on the best lenders in order to find the best deal, you must look around and find suitable lenders as each one offer a number of different deals
- Refer to a mortgage broker - speaking to a broker will enable you to learn more about other home loans that you may not have heard of
- Do freelance work - your work history will be incredibly important for lenders as they will be able to see how you can sustain yourself financially for a period of time
- Register to be on the electoral roll - doing so will help improves your credit score by 50 points
- Hire an accountant - they are experienced within the field and have knowledge on how to manage your accounting needs effectively
- Organise your time properly - we suggest that you focus on managing your time effectively and work on managing your documents in a suitable order so that you may present them in an orderly fashion (we’ll elaborate more on what documents are essential)
- Submit a Self-Assessment form - completing one will enable lenders to see your proof of income for a period of time.
What documents are needed to apply for a Self-Employed mortgage?
Lenders adhere to a stricter criteria when scrutinising the paperworks from self-employed individuals. Follow this list to find out what lenders will request from you:
- Make sure you have a valid photo ID with you - You must make sure your driver's licence has your current address on it if you provide it too
- A council tax, utility bill, or financial statement will suffice as proof of address - You should switch one of your accounts to postal statements if everything is done online
- If you have a full-time job in addition to your self-employment, you'll need 3 to 6 months' worth of payslips and P60s - Some lenders may want 2 years' worth of P60s if you've received additional income such as bonuses or commissions
- If you're a Limited Company director, you'll need the previous two years' worth of signed-off accounts; some other lenders will accept just one year's worth. The most recent accounts should be older than 18 months so try to complete these accounts as soon as you can
- As self-employed individuals, you must request 3 years’ worth of SA302s and a tax overview from HMRC. They serve as evidence of your earnings
- Bank statements should be provided and can be presented in paper form or digitally;
- As a contractor, you must provide at least 12 months’ of contracts that have been signed by relevant parties
- A statement is needed to depict where your funds are currently held
To reiterate, there are 3 things you must keep in mind in order to increase the likelihood of getting a mortgage.
- A good credit score
- A healthy deposit
- Enough income to secure each monthly mortgage payment
We are aware of the difficulties that self-employed individuals face in the current economy, applying for mortgages is not simple but here at Persona Finance, we are happy to support you by managing your accounting needs. Contact Persona Finance at [enquiries@personafinance.co.uk] for more advice on Self-Employed Mortgages or for other business/ accounting queries.
