Self-Employed Mortgage First Time Buyer
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Self-Employed Mortgage First Time Buyer
Harry here talks to us about mortgages for self-employed First Time Buyers.
Can I get a mortgage as someone who is self-employed and a First Time Buyer? How does it work?
Yes, you could get a mortgage as a First Time Buyer. It’s not particularly difficult. It really comes down to how long you’ve been self-employed.How many years do you have to be self-employed to get a mortgage as a First Time Buyer?
There are a couple of lenders that will allow a mortgage based on one year of self-employed work, as a minimum. Most lenders, however, will require two years of self-employed income and some even three.How much can I borrow for a mortgage if I’m self-employed and a First Time Buyer?
The rules are very similar as for a standard First Time Buyer, and you could generally borrow 4.5 times your income. If you’re self-employed, that will be 4.5 times your net profit. Generally, lenders take an average of the last two years, while some will use 4.5 times the latest year – but they will generally want some further clarification from yourself or an accountant.How is a mortgage calculated for a self-employed First Time Buyer in the UK?
Your age and other credit commitments will obviously come into play, but as a maximum, we’re looking at 4.5 times your annual income.What documents do I need to apply for a mortgage as a self-employed First Time Buyer?
To prove your income, the main one is what’s called your SA302. It’s your tax calculation and tax year overview, for the last two years. If you’ve only got one year’s accounting records, lenders will quite often ask for an accounting reference, in which case you need to supply your accountant’s details. That’s not applicable if you’re a sole trader and you do your own tax returns. The lender’s likely going to want to see some business and personal bank statements, to prove that the income that’s showing on your tax returns matches up and is sustainable.Speak To an Expert
Aitana Financial Services was established in 1993, and today we cover the whole of the country, focusing on giving the best advice for your circumstances. We really pride ourselves on the quality of our advice, and it’s the reason we’ve grown through recommendations from happy clients.
What if I have bad credit as someone who is self-employed and looking at my first mortgage?
A mortgage is still an option. It really will boil down to how bad the adverse credit is, but there are specialist lenders that look at adverse credit.
They tend to also be the ones that are more flexible on self-employed income, so you won’t be ruled out entirely. It will probably just end up costing you more, but getting a mortgage is definitely a possibility.
How do lenders calculate my income as a self-employed First Time Buyer?
Self-employment encompasses quite a large area as there are different structures involved, and the approach varies depending on whether you’re a sole trader or limited company director.
If you’re a sole trader, lenders use your net profit averaged over the last two years. For a limited company director, there are a couple of different options. We could use your tax calculations and the income you’ve taken out of the business, the same as a sole trader, but we could also use your salary and dividends.
Or, if you’ve not taken all the profit out of your limited company, we could look to use the salary you’ve taken from the business plus your retained profit. Generally it’s profit after corporation tax. So it really depends on your self-employed status as to which way we would proceed.
How can I improve my chances of getting a mortgage as a self-employed First Time Buyer?
As for anyone looking to buy a house, especially as a First Time Buyer, avoid taking out any large credit agreements just before you buy.
Another big one that occasionally comes up is payments with weird descriptions to and from friends. This has caused issues for clients in the past, so try not to make jokes when sending money.
As long as you could get the documents together, there’s no real difference for a First Time Buyer in terms of whether you’re self-employed or employed.
How do I apply for a mortgage as a self-employed First Time Buyer? How can a mortgage broker help here?
The lender’s criteria for self-employed clients are all slightly different and so the most suitable choice depends on many things: whether you’re a sole trader or limited company director, how long you’ve been self-employed and what sort of deposit level you’ve got.
That’s why it’s so helpful to seek advice from a mortgage advisor. Spend some time going through all the information we require, and we will be able to recommend the right lender for your specific situation. But there’s no reason it should be any more difficult than for someone who’s employed.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
