Being self-employed has many advantages, but there are some disadvantages as well. One of those disadvantages is the difficulty in acquiring a mortgage. Being approved for a mortgage is more difficult for self-employed people than it is for someone that is employed by a company or agency. One reason for this is that it’s more difficult for self-employed people to prove their income.
Another reason is that the income can fluctuate from time to time, especially if the business is seasonal. However, there are some things self-employed people can do to help them secure a mortgage. Here are some key factors to consider for people applying for a mortgage for self-employed people.
Length of Self-Employment
As it is with most mortgage loans the lender will look at the length of employment a person has with a company. However, the length of self-employment is an even more important factor to a lender and being approved for a loan. The longer a person has been self-employed, operating the same business, the more chance they have of being approved for a mortgage loan from a lender in the United Kingdom.
Proof of Income
Although the length of employment is an important factor in being approved for a mortgage, proof of income is even more important. If the self-employed person has been a smart business person they will utilize a duplicate receipt system. That is, they not only give a receipt to their customer, but they also make sure they have a copy of that transaction for their records. Moreover, the smart self-employed person will maintain some sort of income book based on their copy of the receipt. This information then becomes a valuable tool in being approved for mortgages for self-employed people.
Bank Account
Another valuable tool in being approved for mortgages is for the self-employed person to have a business bank account. Business deposits that match receipts demonstrate integrity and consistency, both of which minimize the risk that the lender is taking by offering a mortgage. It is also helpful if the bank account has more than a few hundred pounds in it.
Property
Property that is owned by the self-employed person is also a valuable tool in being approved for a mortgage loan. Property and assets can be used as security when applying for mortgages.
The Bottom Line
If the self-employed person has maintained an accurate account of business transactions and deposits the easier it becomes to get a mortgage.
