Self-employed workers have always had a tough time qualifying for a competitive mortgage. Today, things are only getting more difficult.
In the wake of the COVID-19 pandemic, lenders are scrutinising self-employed borrowers more intensively than ever before, to such an extent that even having received financial support from the government during the crisis could count an applicant completely out of the running.
This paints a fairly gloomy picture for self-employed workers looking to own their own homes. However, there are steps that can be taken to at least tip the balance slightly in your favour.
While there are no guarantees, each of the following could significantly boost your chances of qualifying for a competitive self-employed mortgage:
1. Provide comprehensive proof of income.
You can expect to be asked for extensive proof of income from the last few years, at least. The more evidence you can provide of income that is both stable and adequate to cover the costs of the loan, the more likely you are to qualify.
You may also need to provide evidence on future contracts, projects, and general assurances of long-term income.
2. Use an accountant.
An application submitted via, or at least endorsed in some way by, an accountant always carries more weight. Banks and lenders instinctively see applications, projections, and financial documents as more accurate and reliable when they come from an experienced accountant.
Even if this means paying for the services of an accountant for a few months, it is a small price to pay for the added credibility they bring.
3. Boost your credit score
Your credit rating will be taken into account as a major indicator of your worthiness for a mortgage. In addition, your credit score will heavily influence the interest rate that applies to your loan if your application is accepted.
It is advisable to do everything you can in advance to boost your credit score. Even just a few extra points added by tidying up your accounts and paying off a few smaller debts could work in your favour.
4. Save a bigger deposit.
The bigger the deposit you are able to provide, the more likely you are to qualify for a mortgage. Again, this is something that will influence the overall borrowing costs of the facility. Larger deposits mean lower-risk transactions in the eyes of the lender, plus a lower sum of money borrowed.
Offering a larger deposit could hold the key to getting your application through the door with many high-street lenders. If pulling together a meaningful deposit is proving problematic, you may need to consider alternative options away from the High Street.
5. Work with an experienced broker.
Consulting with an experienced broker before applying is essential. This will enable you to not only determine your eligibility ahead of time but also begin building the strongest possible case to support your application.
Many of the UK’s specialist lenders offer their services exclusively via broker introductions. As it may be necessary to direct your application to specialist lenders as a self-employed worker, broker support could hold the key to qualifying for a competitive mortgage.