There are so many benefits to being self employed – the ability to choose your own hours, not having a fixed rate that you can’t improve, being able to take time off whenever you need to. The list goes on! There are so many wonderful benefits to exploring your own business or being self employed, but there is one area that can be really challenging when you own your own business and that’s getting financing. If you’re self employed, you’re higher risks as far as the banks are concerned than if you were employed by a company. This risk can make it really hard to get a mortgage, but there are a few things you can do to try to minimise the negative impact this has on your ability to draw credit. If you’re interested in learning more about my top 4 tips for getting a mortgage when you’re self employed, keep reading to learn more.
1. Use a Specialist
Because being self employed is somewhat rare, it is worth finding a mortgage specialist to help you with this process when you’re not working in a traditional role. By using a specialist, you’re making it easier to get a self employed mortgage because they’re a little more flexible on the lending criteria than banks. If you use a broker who can help you find the right lender to suit your specific needs, you’ll have a better chance of getting approved. They’ll filter out the options that might be too restrictive for someone who’s self employed and help you focus on the companies that are more flexible in that regard. Having a specialist mortgage broker help guide you through the process can take a lot of weight off your shoulders.
2. Plan in Advance
When you are self employed, banks and other lending institutions are going to want to see evidence of operating for a number of years. This gives them peace of mind that your business or operations are more stable. As a general rule, you should aim to have at least three years of proof of trading. That would be in the form of tax declarations, proof of income, bank statements…. try to have as much evidence as possible and that will make your application more likely to be successful. If you’re wanting to get a mortgage, but also wanting to become a freelancer or self employed, it may be in your best interest to secure a mortgage before making the switch.
3. Reduce Your Debt
One thing that lenders look at is your overall debt before they will go ahead with a mortgage for you. If you have a lot of debt, such as credit card debt or student loans, that might be taken into consideration before approving your mortgage. Try to pay off as much debt as possible before you apply so that your application looks more applying. The lenders are going to want to make sure that you have more than enough money left over each month for making repayments once your other bills and obligations are taken care of.
4. Get Ready With Time to Spare
Getting your mortgage approved might take a lot longer than you’d hoped. How long it takes will depend largely on how much you’re looking to buy, what evidence you have to support your application, where you are, the time of year and of course the type of mortgage you’re needing it for. If it’s for a new build, for example, then that might take more time to be approved than a mortgage for an existing, already built properly due to the added risk of a build. If you have a deadline in mind for when you’d like to buy or built, it could be good to apply at least a few months in advance for ‘pre-approval’ so that you have more flexibility on when you buy.
I hope these tips inspire you to get on the right track to getting your mortgage approved, no matter whether you’re self employed or working in traditional employment.