What Documents Are Needed For A Self-Employed Mortgage?
As a Self-Employed applicant, you have access to the majority of the same mortgage products as employed people do. In fact, a small, but growing number of lenders now offer mortgage products specifically for Self-Employed applicants. With the number of Self-Employed businesses in the UK rising quickly and coronavirus accelerating growth, lenders are adapting to accommodate the changing employment market.
The only difference from a Self-Employed applicant’s point of view, is how Mortgage Lenders’ assess your income. All lenders want affordability, creditworthiness and stability of income. Self-Employed income is considered less stable than PAYE income, so lenders use an average of your income over a defined period (usually three years) to determine the income they’ll use to calculate your mortgage.
What specific documents do you need?
The exact documentation needed to prove your income really depends on the type of Self-Employed business you have.
Sole traders (Or freelance workers)
Will need to provide their SA302 forms for the amount of years lenders request in order to determine your average earnings. This is usually three, but can be more or less, depending on the lender.
Will need to supply their SA302 forms as well as certified accounts for the tax years requested and sometimes bank statements. Your salary and dividends is used to determine the loan figure, but most lenders will not consider retained profits.
Your share of the net profits, which must be 20% or more, will be used to calculate the mortgage loan. You will usually need to provide full certified business accounts and SA302s also.
How do you improve your chances of being accepted by a lender?
Before applying for a mortgage, especially with a Self-Employed mortgage application, preparation is key to securing a mortgage:
It’s important to ensure your accounts are signed off by a certified accountant if you don’t ordinarily use one. You should also have the most recent three SA302 forms available. If you’re a director, dividends payments should be prioritised over profit retention in the years prior to your application.
To improve your credit rating; ensure you’re on the electoral roll and that all of your accounts have the correct address. Pay off debts as far as possible and minimise your credit usage.
The more you can offer, the better chance you have of securing a mortgage. It may be worth delaying your application to save more.
Use A Mortgage Broker
Mortgage Brokers, particularly those who specialise in helping Self-Employed applicants, will have access to a wide range of independent Mortgage Lenders. These specialist lenders are more likely to be able to offer you a mortgage.
Experienced brokers also know what each individual lender will or won’t consider and what specific documents are required in every circumstance. They can prevent you from impacting your credit score by applying to a lender that will reject your application