If you are self employed, you may have written off the idea of being able to own a home.
But don’t give up just yet. Not all hope is lost.
While people who are self employed have to jump through a few more hoops than those who earn a salary, it is not impossible to obtain a mortgage. You simply have to tick the right boxes for the banks to consider your application.
So, let’s look into what the process is, what you will need to supply to any lender to gain approval, and how you can best position yourself for a successful mortgage application.
The Process
Like any lending application, there are several things you will need to do…
1: Prove Your Income – Even though you cannot supply the payslip from your employer, you will need to prove that you can service any loan repayments. The idea is to show that you have plenty of profit left to cover costs. So, try not to minimise your income for tax purposes as it can impact your chances of being able to secure a mortgage.
2: Reduce Your Debt – Part of the process that lenders go through is to check you are in a good financial position to service a loan and that your income outweighs your expenses. You want to reduce your debt by paying off any credit cards or personal loans. Make sure you remember to lower the credit limits on your cards as you pay them off as lenders will assess the total debt liability.
3: Have A Deposit – A cash deposit or decent equity in your current property will greatly increase the chances of securing a mortgage. Also, being able to save for a deposit while living within your means will prove that you are able to service a loan.
The Records You need To Supply
Income: To satisfy that you have a steady income to pay your mortgage, you will need to supply 2 years of financial records. These will prove that you have a track record of regular, ongoing work. Affordability calculations are usually done based on your average profit over the last 2 years, so ensure your records are up to date.
Credit History: Check that your credit history records are correct and have any errors amended. Lenders will assess your total credit history, so ensure you do not have any old or outstanding debts owing. Also, your taxes will need to be up to date with all assessments paid on time.
Proof Of Deposit: If you have cash savings for your deposit, you will need to supply bank statements for the account the funds are held in. If you are wanting to utilise the equity in your current home then you will need to supply a valuation of the property along with evidence of any outstanding mortgage amounts.
Position Yourself For Success
Lending to self employed people can be slightly different to those in a salaried role. The bank may see the need to offset the extra risk involved with lending to someone with an unpredictable income. That can mean higher interest rates or more rules on their lending criteria and insurance requirements.
To give yourself the best chance of success, you will need expert advice and support from a financial adviser. Utilising a mortgage broker will give you access to all lending options, meaning you end up with the right finance solution for your individual situation.
Mortgage brokers have great knowledge of the industry, so will know which lenders are open to working with self employed people. They also know the requirements you must meet for each lender and who will offer you the best interest rates.
If you are self employed and are looking for expert advice on how to secure a mortgage then we can help you here at Mortgage Link. The relationships we have with all the major lenders will ensure you get the right solution. Get in touch with us today for a free no obligation chat to check your current financial position for obtaining a mortgage.