Self-employed people often face more challenges when trying to get a mortgage. However, this does not mean that securing one is impossible.
Your Self-Employed Mortgage Requirements
If you are a sole trader, lenders will want to see your net profit. They’ll take into account your share of net profits or dividends and salary if you’re a director of a company, while freelancers and contractors should expect lenders to look at their average income over the past few years.
Although lenders prefer those who have been self-employed for two years or more, you can still get a mortgage even with only 12 months of bills. Usually, you’ll need to show that you have a lot of work to do, but keep in mind that your options may be limited.
How much can you borrow?
It depends on the value of your deposit and how much you win.
It would be wise to save as much as possible for your deposit. This often gives you a typical payment of 4.5 times your annual income. However, this number is not necessarily static as it depends on your circumstances. greater variety of potential jobs.
Once you have all the important information ready, a home loan calculator can help you get an idea of how much you could borrow. Here are some more tips on how to get a mortgage as a self-employed person.
Also read: Which is better? A loan through a bank or mortgage company?
Find a mortgage broker
As a self-employed person, time is probably not your biggest asset. So finding a do-it-yourself mortgage lender who knows what they’re doing should make the process more efficient for you.
Although the cost of a broker might increase your overall costs, they will know what lenders want and can help you find the right deals. It should be noted here that some brokers collect their fee from the lender, which means it would not cost you anything.
Increase your credit score
Sometimes it can be simple omissions that are responsible for a drop in your credit rating, such as old credit accounts that have not yet been closed or that you are not on the electoral roll at your current residence.
You should check your score to see if you can make any improvements. Several companies allow you to do this, such as Experian, Credit Karma, and ClearScore.
Involve an accountant
This is another tip that will increase your overall cost. However, professional advice should not be underestimated.
Lenders are more likely to trust your financial information if a professional has prepared your accounts. You’ll also save yourself some time and benefit from the expert tax advice you’ll receive. Involving an accountant can help you with tax changes and understand what he can and cannot claim as expenses, for example.
Get organized with your paperwork
As a self-employed person, you are already responsible for maintaining accurate tax records. Therefore, you should have a system in place that makes gathering documentation simple and straightforward for your lender.
Lenders will also want to see the SA302 form, which you can access from your HMRC online account.
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Source: HIS Education