Insider Tips: Getting a mortgage if you are Self-Employed
It has got a lot harder to get a mortgage over the last 9 months or so. Covid has wreaked havoc everywhere - and the mortgage industry was no exception.
Lenders are naturally very cautious when it comes to lending money in the midst of a pandemic. They of course have concerns over the economy, unemployment and in a nutshell whether borrowers can and will be able to make their mortgage payments both now and in the future.
For clients in a steady job, with regular payslips, who have, for example been able to work from home then getting a mortgage is still relatively straightforward. However if you are self employed things get much murkier and lenders are making things much more difficult.
Here are my insider tips to give you the best chance of getting a mortgage if you are self employed......
PAINTING THE PICTURE
Not literally! but how your case and situation is presented to a lender can be crucial. The first thing to do is look at what's happened to you and your income over the course of 2020. The banks expect you to have had a downturn as a result of Covid....but has your income rebounded? Are you busy again? Lenders are looking closely at what's coming into your bank account by way of income. If you are in a position where income is flowing again then Lenders are being relatively flexible. If you are in a position where income has fallen and not recovered then expect lenders to downgrade what they are prepared to lend.
So is the picture of your business one of one of remaining steady through 2020? or having a downturn and then a rebound? If so you should be ok....BUT you need to be able to evidence the picture you paint!
PROVING YOUR INCOME
If you are self employed you will probably be aware that 2 years accounts and also your tax calculation (SA302 form) and Tax Year Overview forms for the last two years are a necessity. Usually that would have been enough, but in the current times even more preparation and evidence is required if you are to give yourself the best chance of getting your mortgage.
It is worth getting 6 to 9 months worth of business bank statements ready - this shows a lender your income over the period of the pandemic and can help bolster your case of riding out Covid in good shape. It is also worth preparing a summary of orders/invoices to pre-empt any questions a lender may have about how strong your income is likely to be moving forwards.
GRANTS, LOANS AND MORTGAGE HOLIDAYS
Despite Government assurances, Lenders are taking a dim view of applicants who have taken bounce-back loans or mortgage holidays. Grants are typically ok, but lenders look at borrowing (bounce-back included) and mortgage payment holidays as evidence that you couldn't meet your obligations and needed to borrow to keep going.
As unfair as this sounds - if you have taken either option above you will likely face difficulty obtaining lending, or borrowing to your required level. If you have taken a bounce-back loan and not used it - then its worth considering repaying it if you are looking to take out a mortgage.
DON'T 'DIY' YOUR MORTGAGE
Getting a mortgage if your self employed isn't always easy at the best of times - and at the moment is increasingly more complex. Mortgage brokers do it all day everyday - they know how to assess your circumstances, what you are going to need, and how to present your case to a lender. They also know where you are most likeley to 'fit' with a particular lender.
When my car breaks down, I take it to a mechanic. If I am ill I use a Doctor.....you get my point!
CHECK YOUR CREDIT FILE
Not just your score! Check your credit accounts by downloading a credit report. Make sure you don't have any blips, missed payments and that you are on the electoral roll. This is more essential than ever as lenders are being particularly harsh on any adverse credit!
It never ceases to amaze me, and indeed many of my clients how often a missed payment shows up due to misreporting from credit agencies - always worth a check before you apply for a mortgage to ensure nothings showing that could adversely affect you.
PREPARATION IS KEY
Make sure you have everything prepared before you apply. Things like ID, proof of address, 3 months personal bank statements, accurate figures relating to any debts you have, income proof and of course a fact find - are essential.
Lenders will ask for a lot of information and supporting evidence. Having this all sorted in advance is crucial to the success of your mortgage application and also the speed at which is gets processed.
WANT TO GET STARTED??
Please feel free to get in touch for friendly advice and guidance!
07740284270