How Can Self-Employed Apply for Mortgage and How is It Different from Professional Employee?

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By Brandon

Getting a mortgage as an employee is simpler than being self-employed. Some lenders are afraid that self-employed won’t make a steady income to cover their monthly mortgage payments, and they may decide not to put in the extra effort necessary to provide a mortgage.

The self-employed community is not always viewed by lenders as an ideal borrower. Professional employees are seen as exceptionally trustworthy borrowers due to their consistent, easily verifiable source of income, and credit scores. Compared to more recent employees who will provide employment proof, self-employed borrowers may need to provide more documents to demonstrate financial benefit.

You can contact Mortgage Experts Online if you’re looking to work with real experts. They are aware of how challenging and stressful it can be to find the ideal mortgage. Their specialists can assist you in locating the best self-employed mortgage available to satisfy your unique needs because they only partner with industry-leading, specialised self-employed mortgage consultants.

If you’re self-employed and need a mortgage, you can follow these tips which will help you get mortgage approval easily –

Documents Required

You will require the following documents to demonstrate your income if you’re applying for a self-employed mortgage:

  • Certified accounts for minimum two years.
  • A tax year review from HMRC or SA302 forms for the previous couple of years
  • If you’re a contractor, you should have proof of future contracts.
  • If you are a company director, you must provide evidence of retained profits or dividend payments.
  • Recent 3–6-month bank statements for income stability.
  • ID proof (passport or driver’s licence.)
  • Address proof such as a utility or council tax bill.

Self-employed mortgage calculation

It’s important to shop around for the best offer because it is the lender that decides how much you can borrow and how it will be calculated.

Some lenders decide the amount you can borrow based on your most recent years of financial profits, while others decide exclusively on your most recent year of trading.

In addition, they will determine your mortgage payment differently based on your legal situation:

  • Lenders consider net profits as financial gain when evaluating sole proprietors and partnerships
  • Lenders examine dividends and regular payments for restricted companies. They occasionally look up the company profits and monthly payments.

Deposits required 

As a self-employed mortgage candidate, you always need a deposit. Lenders may require you to hold low loan-to-value than any of the employees. For instance, some may argue that you should only have a deposit equal to at least 5% of the total property value on hand.

Following the Covid-19 pandemic, numerous lenders have constrained their requirements even further. You will therefore be required to provide information on your turnover for the last three months as well as historic accounts so that lenders can clearly understand how your earnings have changed. Applications are occasionally reviewed individually, and some lenders are also far more forgiving than others. Using a broker could help you find a lender who is far more likely to accept your application.