With no consistent salary to go on, many self-employed people including freelancers and contractors may believe that a mortgage is out of the question. However, it certainly can be done, it’s just a bit trickier to get approved.
How do I get approved for a mortgage?
Keep detailed records
This is the most important one on the list. Make sure you’re keeping detailed records of your income for the last two to three years.
Unfortunately, if you’ve just started a business or gone freelance in the past few months, you’re probably not going to get approved unless you can provide evidence of a consistent income.
Lenders have no idea what your finances are going to look like in another month or year. It’s common enough for business owners themselves to not know how much they’ll be earning after a couple of months, never mind years to come.
So for lenders, it’s simply too risky for them to approve a mortgage if you’re at that stage. Some lenders are a little more laid back than others and will accept details of only the past year of trading. Even so, it’s worth having a few years of records behind you before you start an application. Consistency and stability is what you’re aiming for here.
Gather a big deposit
You’ll be doing this anyway but if you’re self-employed, you might want to save up for longer to ensure you’ll be approved with a larger than usual deposit. This will help lenders look more favourably on you as it’ll show you’re financially stable enough to make repayments.
Maintain or build good credit
This may go without saying but a good credit history is crucial to being accepted. If you know your credit score isn’t particularly healthy, then you might want to hold off applying for a mortgage as you may not get accepted.
Instead, spend this time trying to boost your credit score by paying off outstanding debts and using your credit card wisely. You’ll have more time to save for a deposit and as a result, your mortgage rates will be better.
Hire an accountant
Having an accountant on board will help you to keep immaculate records that lenders will want to see. Lenders tend to prefer to deal with borrowers who have an accountant on board to prepare accounts as they know they’ll be accurate and done to a high standard.