The way in which we work has changed. Research shows more people than ever are working for themselves – or considering launching a business soon. But with the mortgage market still somewhat dated in its criteria for borrowers seeking a loan, what will happen to the would-be homebuyers in this great entrepreneurial revolution?
Before the economic collapse in 2007/2008 getting a mortgage when you were self-employed was quite straightforward – or, at least, it was beginning to be. Self-certification mortgages – whereby the borrower would simply have to tell the lender what they earned but didn’t need the paperwork to prove it – were growing in popularity. When the credit crunch hit however any ‘risky’ lending was immediately stopped and self cert was deemed among the riskiest.
Self cert was banned by the industry regulator the FCA. However, the launch of an overseas lender offering self cert earlier this year proved just how in demand mortgages for the self-employed are – it was inundated with applications to such an extent that within days it had closed its doors to new business.
However, it is possible to get a standard mortgage even if you’re self-employed – as long as you have evidence to prove you can make the repayments. Make sure all of your accounts are in order. The longer you have been working for yourself the more chance you’ll have as the lender will be able to make a more accurate assessment of your regular income. Use an accountant to ensure your accounts are in order.
Having a decent sized deposit will also help so save as much as possible before applying. And make sure your credit score is the best it possibly can be. You can access your credit report using a number of websites – mortgage lenders generally use Experian or Equifax. If it’s not as great as it could be you can take some simple steps to improve it such as making sure you’re on the electoral register, cancelling unused credit cards and checking the address on any old accounts is correct.
For more information, contact us in our Manchester city centre office.