Can you get a mortgage if you are self-employed?

Self-employed man working from café

Nearly 5 million workers in the UK are self-employed. Working for yourself or freelancing typically means that it might be harder to get a mortgage, as a lender may question your ability to receive regular income in order to make your monthly mortgage repayments. However, it’s not impossible for someone who is self-employed to borrow money to purchase a home.

Why is it harder for freelancers to get a mortgage?

Self-employed workers and freelancers may seem like a riskier prospect to a mortgage lender than someone in ‘regular’ full-time employment, even if you’re earning more than you would on a fixed salary.

This is because lenders will want to calculate your risk based on averages, and if your income isn’t guaranteed, it can’t be factored into the repayments.

Tips for getting a mortgage if self-employed or freelancing

Work out how your income will be calculated

As a self-employed or freelance contractor, lenders will likely average out your income over the last few years. Some could use your most recent reported income whereas others might do a ‘worst case scenario’ and use your lowest reported income.

Day rates you charge might also be used to calculate what a year’s worth of income could be.

Avoid gaps in employment

As a freelancer, you’ll be less of a risk if you can show you’ve had consistent employment. Even if you take on smaller tasks to avoid having gaps, showing you can consistently land some income could help your standing in the eyes of a lender.

Complete SA302 forms

Your SA302 form provides evidence of your self-assessment tax calculations.

Most lenders will expect the last three years of forms, though some might accept less.

Lead in with long-term work

If you have long-term clients or projects that span a lengthy time, highlight this. It could provide proof of future billings, in order to reassure lenders that you can keep up with repayments.

Pay more up-front

If you can save enough to be able to apply for a mortgage with a larger deposit, you could have a better chance of being approved.

Little steps to help achieve this could include cutting costs the year before applying for the mortgage. Lenders tend to assess your regular expenditure, like on food or telephone bills.

Look around different lenders

As well as looking for a specialist lender who might specialize in self-employed mortgages, you could try to use a manual underwriter.

Some lenders might rely on automated technology, deciding everything purely on how the numbers add up. If you can find a lender who’ll sit with you and discuss your circumstances, you might have a better chance.

Understand your credit score

Make sure that your credit file is in order. You may want to check your Equifax Report & Score – which is free for the first 30 days, then £7.95 monthly. The score gives you an indication of how creditworthy the lender may find you – if this is poor, you may want to improve it before applying for a mortgage. The report gives you a view of your credit history.

If you can’t manage one or more of the above, bear in mind that there is no one-size-fits-all method to obtain a mortgage, as lenders assess individual applications based on a number of factors. It is possible that a lender may still grant you a mortgage – however, you may want to balance this against the risk of making applications that are likely to get rejected, which could leave behind hard application search marks on your Equifax Credit Report for a year. This means that, if you make another credit application that year, lenders may think that you’re reliant on credit, having applied so many times. Because of this, you may want to get your paperwork and financials in order before you apply for a mortgage.

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