Can Self-employed Professionals Still Secure A Mortgage?
If you had asked us the exact same question a decade ago the answer would have been much easier and straightforward. Prior to the recession, it was almost impossible not to get your hands on a mortgage even if you were self-employed, a freelancer or a contractor.
Pre-2007, self-employed professionals did not even have to physically prove their income to independent mortgage brokers, lenders or high street banks. They simply had to state the annual figure they earned. Naturally, this led to vast numbers of self-employed people telling white lies to lenders, exaggerating their annual salary in order to obtain a larger mortgage and that bigger home.
The age of the self-certification mortgage well and truly dissipated following the credit crunch however, resulting in mortgage lenders tightening their belts.
As a consequence, self-employed mortgage applicants were hit hardest, having to prove not only a stable income but a healthy deposit on the property they wanted too. So what is the mortgage landscape like now for those who work for themselves?
What do self-employed workers need to do to have their mortgage application approved?
1. First of all, most lenders now require a minimum of two years worth of accounts for sole traders, freelancers and contractors. This can sometimes rise up to three years depending on the lender. However, by selecting a mortgage through an independent mortgage broker they will be able to source a lender that is more sympathetic to self-employed applicants.
2. In order to have those two-to-three years worth of books up-to-date, it’s highly recommended that self-employed workers seek professional help with their bookkeeping from an accountant to save time during the mortgage application process and give the lender utmost confidence in their financial affairs. Some lenders may even stipulate that the books must be checked by a certified or chartered accountant.
3. A track record of consistent, paid work always goes down well in the eyes of mortgage lenders. Don’t panic if you haven’t got such a stable history, particularly if you can prove that your outlook for work in the coming months and years is particularly fruitful i.e. with contracts or projects in the pipeline.
4. You can probably breathe a sigh of relief if your credit history is rock solid. This will certainly increase your chances of getting a mortgage whilst self-employed. Lenders will also check the credit history of your business too, so even as a sole trader it’s important to make sure there are no surprise unpaid debts lurking around the time of your mortgage application.
There is no doubt that the mortgage landscape is improving since the recession. Lenders are becoming more accommodating and you should therefore never assume it’s impossible to get a mortgage if you work for yourself.
If in doubt, speak to a UK mortgage broker about your choices – they’ll be able to put you on the right path for your financial position.