While many people make a good, or great, income being self-employed, it can make getting a mortgage or other loan more difficult. However, this doesn’t mean it’s impossible. There are just a few more things to take into consideration. While you can use an online mortgage qualifier calculator, it’s often helpful to seek the advice of a mortgage professional as well. Before you do, here are some important things to know if you’re applying for a mortgage while self employed:
1. What You Need
When applying for a mortgage loan, you must be able to prove your income to show that you’ll be able to make your monthly payments in full. Most lenders will require at least two years’ worth of accounts and tax returns in order to prove your income. The more you can provide in this case, the better. To apply for a mortgage, you’ll generally need:
Good credit rating.
Proof of regular work/employment.
Two years’ accounts and tax records.
A substantial deposit.
Lenders will also usually require a certified or chartered accountant to prepare your financial records for you. Make sure you’ve done your part by providing records that are up-to-date, as it can be a detriment to your application if it is disorganized.
2. What if You Don’t Have Two Years’ Accounts?
If you aren’t able to provide two years’ of accounts, you may still be able to get a mortgage. If you can prove that you’ve been regularly employed, and that you have work lined up in the future, then a mortgage lender should still consider your application. If this is the case, it’s important you do all you can to help your application. This means proving that you have excellent credit history, and that you are able to put forward a good deposit. By keeping your application up-to-date and expertly organized, you can improve your chances of qualifying for a mortgage. If you’re unsure about whether or not you would qualify for a mortgage, you can use an online mortgage qualifier calculator, or set-up a meeting with a mortgage professional.
3. Your Business Set-Up
The type of business you own can also influence your mortgage loan qualification. There are three main business structures:
Sole Trader: This means you are the only owner in the business, therefore you keep all the profits.
Partnership: If there are two business owners in a partnership, mortgage lenders will look at each partner’s share of the profit to determine your income.
Limited Company: A limited company means your business is kept separate from personal affairs. If you are the company director this means you will pay yourself a salary.
Your potential mortgage lender will take into account the structure of your business when reviewing your application so make sure you are specific and thorough. For more information about applying for a mortgage loan when self-employed, or to calculate your ability to qualify for a mortgage, contact us today to book a meeting with one of our mortgage professionals.