How to Get a Mortgage if You Are Self-Employed

How to Get a Mortgage if You Are Self-Employed
In most cases it is harder to get a mortgage if you’re self employed, work on a contract basis or have an income that is irregular or comes from multiple sources rather than when you are an employee and can easily prove your income.

A person is considered self-employed when he or she runs their own business or just work for themselves without an employer. Directors of small limited companies are generally classed as self-employed by mortgage lenders as well.

Despite the fact that self-employed people rather often earn more than officially employed ones and their number in the country is rather high, some mortgage lenders’ attitude towards them can be rather unfriendly sometimes. In most cases the problem occurs because many, if not all, lenders require borrower’s income to be documented and proven. If this is easily done by officially employed borrowers, self-employed ones can have significant troubles doing that. Actually, there are no such straight forward ways of doing that for self-employed as there are for employed ones, such as pay slips.

An alternative way for self-employed people to prove their income is to audited accounts that show their income during the last three years. However, the information in them is not always accurate. The thing is that usually as many allowable expenses as possible are offset against tax. This reduces self-employed person’s factual net profit, so the lender bases his decision on lowered income figure. This means that the borrower obtains a sum that is actually lower than the one he can comfortably afford. If you are a newly self-employed, your situation is even worth because you may not yet have sufficient trading history to provide your accounts information.

The problem solution for self-employed people is mortgage lenders who specialize in self-certified and self-employed mortgages. The good thing about this type of lenders is that they look at each case individually instead of applying standard one-size-fits-all schemes. In many cases self-certification means that you just declare what your income is, without any proving documentation.

Another advantage is that many of these lenders offer very flexible mortgage plans, which allow underpayments and overpayments. This means that if the times are good and you have some extra money you can pay more, and if you’re going through some difficulties or have some additional expenses you can pay less. This is very convenient for people, whose income varies from time to time or seasonally, for example.

© 2010, Jericho Mortgage — How to Get a Mortgage if You Are Self-Employed