Lenders all have different rules when it comes to self-employed applicants, but here are some general rules to follow if you are self-employed and thinking about getting a mortgage.
Here are a few simple steps to follow written by a mortgage advisor to ensure that you get accepted:
1. Declare all of your income, don’t minimise your income for tax purposes.
If you use an accountant, they may advise you on conventional ways to reduce your income in order to pay less tax. We strongly advise against this if you are looking to get a mortgage when self-employed. Lenders will use your total income received, a figure you can see for yourself from your SA302’s as the basis of your income when you are a sole trader.
Documents that lenders accept to prove your income:
Income MUST be evidenced by either: HMRC tax returns (SA302’s) or Company Accounts / Accountants Certificate.
Unfortunately, mortgage lenders will not use your latest bank statements on their own as evidence to show how much you are earning.
(The above image shows a sample SA302)
2. Submit your HMRC tax returns every year (SA302’s) if you are a sole trader
You can get a mortgage with 1-year’s self-employed accounts or tax returns with some of the top lenders, but it will be a smaller pool of lenders that we can work with unless you have a minimum of 2-years self-employed accounts or tax returns.
3. Keep your bank accounts in good order and don’t take out any short-term loans
In the run up to applying for a mortgage, it is important to keep your bank account in good order. Lenders will likely request personal and business bank statements to show your outgoings and daily expenditure. If you are running up online gambling debts or if you have rejected payments showing on your bank statements or un-arranged overdraft fees, the lender will consider this a red flag and may reject your mortgage application.
Likewise, taking out short-term loans are also not seen in a favourable light and if you have ever taken out a payday loan in the last 6 years you could find your mortgage application being rejected.
4. Speak to our online mortgage brokers for advice
Our online mortgage advisors are available in the evening and on the weekend via secure live chat. We don’t charge a fee and we are experienced in submitting self-employed mortgage applications, whether you are a sole trader, contractor or if you have a Ltd Company.
Author: Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
Last Updated: 7th June 2019.