It’s a bit more difficult getting a mortgage if you are self-employed but achievable. If you are part of the UK self-employed Army and are looking to re-finance or purchase a home, this article will give you some help to getting a mortgage for your personal situation.

Over the last few years it has been getting increasingly harder to help Self-employed and contractors get a mortgage – This section of our important work force has been hit harder than any other.

Before the infamous credit crunch, which was in 2007, there was an option with many lenders to self-certify your income – Which meant they didn’t have to prove their income, there income amount only had to match the type of occupation there were in, which was very loose. Many lenders even offered Fast Track options which negated any checks at all – which allowed any previous credit problems or rent arrears.

Self-certification mortgages were originally designed for business owners who had lots of different income streams who found it difficult to put all their income together or their income fluctuated during different times of the year.

Unfortunately, self-certification or self cert mortgage were not sold correctly, and people were able to increase their actual income in order to get a higher mortgage or loan.

Self-cert mortgage and no checks mortgages or Fast tracks were then stopped completely, which is why it’s harder to get a mortgage if you’re a self-employed but not unachievable if you can prove your income.

Mortgages for the Self employed

The main change for the self -employed is they need to have proof of their income to show their potential bank or lender- The majority of lenders would like to see 2 years accounts but some will except 1 year or proof of income from HMRC- For more details please contact us at Total Home loans and our advisors will be able to discuss your circumstances in detail.

The information the majority of lenders ask for:

• Your last 2 years accounts
• A deposit to put towards the purchase ( If it’s a purchase of a property )
• Your credit file to show you have kept up with previous credit agreements
• You are buying or re-financing a suitable property for their guidelines

The bank or lending company will generally take an average of your last 2 years income to use as part of their calculation to work out how much they will lend you. Some lenders insist you have a suitably qualified accountant who has prepared your accounts- It’s important to look around for an accountant who is either Chartered or certified – When you are thinking about applying for finance it’s a good idea to make sure your accounts are up to date, as lenders will insist on seeing your latest accounts.

Many of our clients that we have helped in the past had very individual circumstances and we were able to help get them mortgages using other proof of income- Please contact us directly to discuss your individual circumstances.

Credit Searches

If you have or have ever had ADVERSE credit, i.e. late/missed payments, CCJs, Defaults etc, the broker  will need to see your credit report, which you can obtain online from Equifax, Experian or www.checkmyfile.com  – the latter offer a FREE trial.

“By clicking on one of these links you are departing from the regulatory site Total Home Loans.” Neither Total Home Loans nor Intrinsic is responsible for the accuracy of the information contained within the linked site”.

You will be asked for your debit card each but this is ONLY to check your ID, as long as you cancel within the trial period, you will not be charged.

Once registered with checkmyfile, you can download your credit report via a button at the bottom left of their website – if the button does not appear,  you need to call the 0800 number at the top of their website and ask them to release your credit data so you can download your report and the button will then appear.

Showing or Declaring your Income to the lender

To show your income to your lender you generally need 2 years accounts, which have been prepared by a suitably qualified accountant. It’s essential that you understand the accounts in case the Lender or Bank asks additional questions. However your accountant will be able to help you if they have prepared your accounts and answer any questions the lender may have. Your income may have fluctuated or taken a dip in a certain years due to business expansion or a change in the market which the lender may question.

It’s common that your accountant helps you legally keep your income low to reduce your taxable income. However this may go against you when it’s time to apply for a mortgage or re finance as you need to have enough income to service the loan and all your other expenses.

Please feel free to call or Email us to give you any advise or call 01202 232160 and speak to one of our advisors.

Another common thing that we see is a director of a limited company may choose to keep some of the profits in the company, instead of taking it out.

It’s important to approach a suitable lender that will use retained profits when underwriting the application; m a more specialised lender might be required for the finance that we can help arrange for you.

Mortgage Brokers

Now more than ever before have mortgage brokers helped the self employed find their way through the mortgage jungle and advise them who will offer the best rate and who will be the best lender to approach based on there circumstances