Getting a mortgage when you are self-employed has typically been more difficult compared to if you were on an employer’s payroll. This is due to the fact that it is more of a challenge to prove that you have a solid, reliable source of income which would allow you to make consistent monthly payments towards the mortgage.
Self-employed candidates will also have to fill in additional paperwork that others don’t necessarily have to complete. These may include:
Business and personal accounts information
HMRC tax overviews and calculations
Business bank statements
Projected income and future plans for your business
However, in this article we will take a look at the various ways you can ask your bank or other mortgage lenders to provide you with the funds necessary to buy a house (or borrow money against your existing property).
Keep on Top of Your Credit Score
A higher credit score will make you more attractive in the eyes of a lender. It provides an indication that your business is thriving and not struggling in any way financially.
An especially high credit score may even qualify you for more favourable interest rates on mortgage loans, should you fail to make any monthly repayments on time.
Decrease Debt, Increase Income
The Debt-To-Income ratio (DTI) shows how much debt you have in comparison to your business’ takings. This has to be kept low to convince the lender that your company is financially stable enough to continue making monthly repayments for the mortgage.
You can lower your DTI by increasing your income and lowering your liabilities. The latter can be achieved by paying off consumer debts, such as credit cards and car loans.
Build Up Your Emergency Fund
If you have a lot of money in an emergency fund just in case your business endeavours don’t go to plan, the mortgage lender will be once again more likely to offer you the loan.
This is because they can feel safer knowing that even if your business income isn’t enough to make the monthly payments, you can take money out of the emergency fund to repay the loan.
Pay a Large Down Payment
What better way to prove to a mortgage lender that you have plenty of funds available than to make a significant contribution to the outright purchase of the house immediately?
It will also prove that you are fully invested, both financially and mentally, in the buying of the property.
Speak With Us
Here at PPS Chartered Accountants, we can offer the very best advice on all matters related to properties and property development. We can take a thorough look at your financial circumstances and suggest which mortgage loan deals will be most beneficial for you.
We understand that applying for a competitive mortgage can be a very time-consuming and confusing process. Our aim is to explain all aspects of a mortgage that you need to know in an easy to understand manner, so you are aware of what you are getting yourself into. We can also assist with filling out all the paperwork that the mortgage lender asks for.