Self Employed Mortgages - All Circumstances Considered including Bad Credit Self Employed individuals
Lenders attitudes towards people who are self employed in respect of obtaining a mortgage have become stricter and stricter over the years and the requirements for evidence of income for self employed people vary from lender to lender; some lenders may require a full three years chartered or certified accounts where other lenders will simply accept what we know as an accountants certificate.
It all depends again on the clients circumstances, their background, credit history, level of deposit they are putting down on a purchase or the amount of equity that the applicant may have in their current property. It is basically a risk assessment exercise from all perspectives.
In today's climate lenders generally are a lot more cautious in their approach to lending to self employed people than they are for those of us who are in full time employment; that said however, as a company the largest proportion of our business does come from the self employed sector and this is an area which we see will continue to grow in the months and years ahead so don’t be put off if you have previously approached a High Street bank or building society and been declined for mortgage purposes as it does not necessarily mean that there are no lenders out there that will assist.
We have good working relationships with many of the High Street banks and building societies who work closely with us to ensure that where a case is possible we will source a home for that potential client.
More Information on Self Employed Mortgages
With lenders becoming increasingly more scrupulous with their ability to offer mortgages, self employed people may have found it difficult to obtain the credit that they need in order to buy a property.
A self employed person is classed as someone who works for themselves or runs their own business, and who does not rely on a fixed salary through the PAYE scheme.
With over three million people in the UK being self employed, mortgages for self employed people were created by lenders in order to offer a way for people like contractors and freelancers to step onto the property ladder.
The reason why self employed people might find it difficult to obtain a normal mortgage is because their income can be very irregular and difficult to prove. A lender would look at an application from a self employed people and might see it as a risk, because they cannot be sure that the applicant would be able to meet all the monthly repayments.
However, some lenders are still willing to consider mortgages for self employed people. In these instances, the lender looks at the individual borrower’s overall ability to pay off the loan, rather than just their earnings. These lenders understand the varied work patterns of someone who is self employed and will take into consideration the job role, be it as a seasonal worker, contractor or someone who runs their own business. This allows a flexible outlook rather than a generic one-size-fits-all approach.
This means that the lender will look at the applicant’s credit score. A strong credit history is very important to prove to the company that the borrower has paid off all debts in the past, on time and in full. The lender will also review any outstanding debts or credit cards that the applicant has.
Each lender's circumstances for self employed people vary but both ourselves as brokers and the lender are under increasing scrutiny to ensure that we are both satisfied that any potential client is self employed can demonstrate to us that they are earning the income which they state that they are. Other incomes can also be taken into account for self employed such as working family tax credits, fostering allowances, investment income etc.
Again, a completed fact find will arm us with the information to be able to put together the income confirmation which is normally these days the most dictating factor as to whether a lender will advance a mortgage or not.
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