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Though everyone gets the same mortgage deals and is assessed against the same affordability process if you are self-employed, you may be seen as more of a risk by the lender hence it is more challenging to get a mortgage secured.
The salaried borrower can prove their income easily with payslips and employment contracts, but it can be harder for the self-employed to prove the same.
They need to jump extra hoops during the mortgage application process, where lenders would require more evidence of income or a higher deposit from a self-employed applicant to content their risk assessments.
For a self-employed mortgage application, knowing what to expect and being well-prepared should help you get access to the best deals and make the process easier.
You’ll need to have:
Lenders assess the affordability of the mortgage loan so they want to see that you can make regular repayments.
So they review your income with your self-assessment tax return, and the SA302 tax calculation form can be downloaded by yourself or you can ask your accountant to provide them for your application.
Most lenders will require a minimum of complete years of accounts from someone who is self-employed.
Then they will take an average, so the more paperwork provided to a lender, the better.
If COVID has impacted your profits it’s preferable to provide more than two years of accounts in support of your mortgage application.
You may also want to wait until profitability has improved before applying.
Evidence of future contracts along with current income provides evidence of future earnings.
While many lenders will require a minimum of two years’ accounts, if you have recently become self-employed and don’t have this yet, it may still be possible to get a mortgage.
In such conditions contracts to support future earning will further brownie points to your application.
Make sure your credit report is accurate and, work towards improving it before applying, this is your chance of a successful application. You can:
Build Your Deposit so it can support your application. The best mortgage rates are bagged by those with the lowest loan to value (LTV) ratio.
The larger your deposit the better your access to self-employed mortgage deals will be.
Reference Source: Go Super Script
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