Are you self-employed and having some difficulties getting approved for a home loan? From a lender’s point of view, a self-employed person presents a higher risk than someone else, but don’t let this stop you. The key to securing a home loan is to be well prepared, and here are our tips on how to improve your chances of securing a mortgage.
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Get your accounts in order
Timing and planning in advance are vital if you are considering applying for a mortgage as a self-employed entrepreneur. Discuss your plans to buy a property with your accountant at least a year in advance so that you can get your accounts well in order.
You will need to prove earnings for at least two years to qualify for a mortgage, and lenders will want to see a consistent income during this period. Keep in mind lenders will only consider taxable income. Usually, a mortgage provider will look for the following documentation for a self-employed mortgage:
- Two years of accounts
- Two years of tax calculations and returns
- A credit history/report
- Record of consistent work (including reasons for any drops in income or changes)
Whether using an accountant or preparing your own accounts, get all your documentation in order. Use an accounting software platform such as Wave and keep all electronic paperwork and accounts carefully organized so that you are ready to provide whatever information your mortgage broker will need without delays or complications.
Use a good broker
Everyone has a degree of concern when it comes to applying for a home loan, whether they can secure a mortgage or make repayments. If you are self-employed, this will undoubtedly come with even greater apprehension. For this reason, getting expert help is crucial, and getting the help of a good mortgage broker means you can get advice on how to improve your chances of getting approval.
A mortgage broker will help you through every step of the process, from helping you prepare the correct documentation to finding a lender suited to your unique needs. For example, with Trussle’s new MIP service, you can quickly check if you are likely to be accepted but avoid being rejected or having your credit report negatively impacted. Remember, also, that you are eligible for the same interest rates as another employed lender, and your mortgage broker will help you find the best possible rate on the market.
Improve your credit score
Having your finances well in order is essential for anyone applying for a loan, but much more so for a self-employed entrepreneur, as you are considered a much greater risk by a lending institution. It is advisable to check your credit score, with Experian for example, and make any necessary changes to improve your credit rating well before any mortgage application. Close off small loans and credit cards where possible. Banks will want to see that you have a history of consistent habits of paying off debts on time and without difficulties.
Being a freelancer or self-employed entrepreneur does not mean you cannot get a mortgage. It just means you need to be well prepared, be trading for a couple of years before your application, have a healthy income, a good credit score, and a suitable deposit.
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