Self-Employed? Here's What Lenders Look For

Understanding Lender Requirements

When you're self-employed, getting a mortgage can seem daunting. Lenders have specific criteria they look for to ensure they are lending to someone who can repay the loan. Understanding these requirements can help you prepare better.

Proof of Income

Lenders want to see a stable income. As a self-employed person, you need to provide proof of your earnings. This usually means showing tax returns for the last two to three years. Consistent income over this period is crucial.

Business Accounts

In addition to tax returns, lenders may ask for your business accounts. These should be prepared by a qualified accountant. Having clear and accurate accounts can make a big difference in your application.

Make sure your accounts show a healthy business. Lenders prefer to see that your business is growing or at least stable. Declining income can be a red flag.

Credit Score

Your credit score is another important factor. Lenders use it to assess your reliability. A high credit score can improve your chances of getting a mortgage. Pay your bills on time and reduce any outstanding debts to improve your score.

Deposit

Having a larger deposit can also help. It reduces the lender's risk and shows your commitment. Aim for at least 20% of the property value. This can make your application more attractive to lenders.

Additional Documentation

Lenders might ask for other documents too. This can include bank statements, proof of identity, and proof of address. Be prepared to provide these promptly to avoid delays in your application.

Professional Advice

Getting advice from a mortgage broker can be very helpful. They understand the requirements and can guide you through the process. A broker can also help you find the best deals available.

Remember, each lender has different criteria. What works for one might not work for another. A broker can help you navigate these differences.

Final Thoughts

Being self-employed doesn't mean you can't get a mortgage. With the right preparation and documentation, you can improve your chances. Focus on maintaining a stable income, keeping clear business accounts, and having a good credit score.

Consider getting professional advice to make the process smoother. With the right approach, you can secure a mortgage that meets your needs.