Most people working from home are classified as self-employed, and this can make it difficult in terms of securing a property can be a bit of a challenge.
This is because lenders will view your work as a riskier, as nothing is guaranteed. However, this does not mean that you cannot buy a property. There are a number of different steps that you can take to show mortgage lenders that you have a reliable income and that you can make your monthly mortgage repayments. With that being said, read on to discover some helpful tips for buying a property when you are self-employed.
What it means to secure a mortgage when you are self-employed…
You need to know what you are up against. More and more people are becoming self-employed, but the property market has failed to keep up with this. If you’re self-employed, you will have fewer options in terms of securing a mortgage. This can mean that you need to pay more. As mentioned, this is because lenders view you as a bigger risk.
Some tips on securing a mortgage and property if you’re self-employed…
Now that you know what you are up against, let’s take a look at some of the things that you can do in order to increase your chance of being accepted for a mortgage at a favourable rate.
Maintain a good credit score
There is only one place to begin, and this is with making sure you have a good credit score. There are a number of different things you can do to improve your credit rating. The most obvious step to take is to pay off all of your debts. You should also make sure you do not make any credit applications, as these will show on your account. Once you have paid off your debts, do not close your accounts. Leaving your accounts open shows that you have credit available to you, yet you have shown restraint, and this will improve your score. You also need to make sure that all of your personal details are up-to-date so that your identity can easily be verified.
Consider new properties
If you are looking for a property to purchase this year, you should do some research to see if there is a new property launch 2018 that matches what you are looking for. The good thing about new properties is that they usually require a lower deposit, especially if this is your first property. This is because there are government schemes that can assist you. Therefore, choosing a new property is a good way to offset the costs that come with trying to find a loan when you are self-employed.
Maintain good records
The lender will want to see your records for the past few years. They will ask to see your tax returns and they may also want to see your bank statements too. If you do not have accounts for the past year, you will really struggle to get a successful mortgage application. In fact, most lenders will want to see around three years of reliable statements to ensure that you are someone that can make the repayments. If this is something you cannot provide, you may be better off waiting for a year or two before making an application so that you can build up a better and more secure financial picture in the eyes of the mortgage lender.
Save a bigger deposit
Another way to increase your chances of being accepted for a mortgage is if you come to the table with a higher deposit. Of course, we know that this is often a lot easier said than done. It’s not like you can just find several thousand in your back pocket. However, if you delay your property search for another year, you should be able to accumulate a much bigger deposit, and this will increase your chances of being accepted for a mortgage by a considerable degree, so this is definitely something that is worth thinking about.
The final tip is to make sure you search around when you are looking for a mortgage, and do your research. There are so many different mortgage providers on the market today, and some will be friendlier towards self-employed individuals than others. It is worth doing your research beforehand so you can find out which companies have a good track record for accepting self-employed individuals and which do not. This will make sure that you do not waste your time dealing with a mortgage provider that is unlikely to lend to you.
Final overview of what you need in order to be ready for a mortgage…
In order to prove you are financially ready, you will need the following:
- Proof of address
- Driver’s license or passport
- Minimal debts
- Clean credit history
- 5 per cent deposit saved at a very minimum (more is desirable)
In order to prove your income, you will need the following:
- Two to three months of bank statements (often more)
- Two to three years of company accounts
- Partner’s accounts or payslips
- Partner’s bank statements
As you can see, there are a number of different steps that you can take to secure a property if you are self-employed. It is all about showing lenders that you are someone reliable and that you will have no trouble making the monthly repayments. If you can do this, you will significantly increase your chances of being accepted for the mortgage you need for your property.