Getting a Mortgage When You Are Self-Employed
Getting a mortgage can be difficult. Banks are much less willing to lend large sums of money than they used to be and want more reassurances when they do. Customers now have to prove not only their income but also their expenditure and the source of that income. Those who flit from job to job, never staying too long in the same place struggle to be awarded a mortgage, as banks don’t trust their income to be consistent. And for those who are self-employed, it can be even harder. Especially if they are also a first-time buyer. If you are in this situation and worried about applying for a mortgage, here is what you need to do.
Save
One thing that will help you to get a mortgage when you are self-employed is having a significant deposit saved. This way, you’ll be asking for much less, and you’ll be able to prove that you are good with money and able to save substantial amounts.
Pay Off Debts
Saving is great. But if you’ve got debts it’s a little counterproductive. If you are in a position to save money, make sure that you use it to pay off your debts, before starting to build a deposit.
This way there is less going against you when you prepare your application.
However, if you have got small debts, such as credit cards or loans, don’t feel like a mortgage is out of reach. As long as you’re not missing payments and have a good credit score, it’s still worth applying.
Find the Right Property
Look at homes for sale to find one that you love. But, make sure you stick to a budget and are sensible in your choice.
Keep Records
When you are self-employed, banks want to see evidence of everything. It’s easy to lie about your income or expenditure, so banks are perhaps slightly miss-trustful of those that declare their own income. Keep all of your invoices and receipts and use spreadsheets to track everything. You could even hire an accountant to make sure it’s all correct and give the bank some reassurance. Keep everything organized and take all of your records to any meetings about a mortgage.
You also need to be careful with your tax deductions. To pay less tax, it’s tempting to put anything you can on your deductions. But, this could make it seem like you earn less than you actually do when it comes to applying for a mortgage. Instead, find ways to maximize your income.
Wait
Most banks will want at least two years financial records for a self-employed person. This could be more, depending on your business and income. So, wait. If you are having trouble, spend another year working hard and keeping invoices before trying again.
Buy with Someone
Another option is buying with someone else. If you are married and your partner works, you could even consider taking out a mortgage solely in their name.
Buying a house when you are self-employed is by no means impossible. You’ll just need to take your time, be careful and make the right decisions and you’ll soon be living in the home of your dreams.
