How to get a mortgage if you run your own business
Running your own business gives you the freedom to call the shots. You get to shape everything from the kind of work you do to the hours you work. While this can feel very liberating, it’s not without its downfalls.
People who run their own business are often very financially secure. They are able to not only provide for their own family, but they might help support other families by creating jobs. While you might enjoy more financial security when you run your own business, the banks don’t always see it this way. In fact, the people you employ could have a far easier time securing a mortgage than you do.
While you might need to jump through a few more hoops than those in more traditional lines of employment, it’s not impossible to secure a mortgage. Some lenders are more experienced in working with self-employed business owners. And many more lenders are waking up to this fast-growing sector of the economy.
If you’re interested in securing a mortgage while running your own business, read on to discover some tips that will make the entire process far easier.
Get your accounts in order
In order to secure a mortgage while running your own business, you will need to provide copies of your accounts. The range of accounts required will depend entirely on the lender. You may be asked for anything from 6 months to 3 years of accounts.
Most lenders will only accept copies of your SA302. This is an end of year document which outlines your tax liabilities. This is why it can be difficult to secure a mortgage if you have only recently started your business. Business may be booming, but you will need to prove to lenders that you are financially secure.
Check your credit score
Credit scores aren’t the only factor that lenders will consider, but it makes sense to check what your score looks like before you apply. Credit scores will vary depending on which credit checking service you use. Sign up to all three major credit reference agencies – Callcredit, Equifax and Experian – to make sure you have a clear picture of your finances.
Small steps like getting on the electoral roll in your current address can go a long way in improving your credit score. Make sure you aren’t missing any easy wins.
Save a healthy deposit
According to Niche Mortgage Info, it helps to have your deposit ready to go when you first make your mortgage application. You might know where you’re going to get the money and be delaying pulling it together. Don’t. Instead, put it in a savings account so that you can show lenders you are serious.
The minimum deposit you will need will be 5% of the value of the property, but you are more likely to be given preferential rates if you can save between 10-25% of the property value. If you have a strong credit rating, you may be able to secure a mortgage with just a 5% deposit. But if you have poor credit or short trading history, you will boost your chances with a larger deposit.
Approach the right lender
If you have been turned down for a mortgage, you might feel like you are a failure. These negative feelings might make you think you will never be able to secure a mortgage while you are self employed. This is rarely the case. If you have a secure source of income, a healthy deposit and a decent credit score, you should be able to secure a mortgage. Often, it’s just about approaching the right lender.
Don’t automatically head to your own bank assuming that your banking history will make them look at your application more favourably. Self employed individuals and those who run their own business will often have better luck with specialist lenders. If you have been turned down by a high street bank in the past, speaking to a specialist mortgage broker could help.
Work with a specialist broker
When applying for a mortgage, you will be conscious that a lot of companies will just try to get money out of you. From credit score repair companies to specialist mortgage advice, it can be difficult to know where to turn. As a self employed business owner, you could benefit from the help of a mortgage broker. The fees you pay to them will likely be covered by the savings you enjoy from getting a better rate on your mortgage.
Working with a mortgage broker can also help you to avoid submitting applications which will inevitably be turned down. A rejected application can lead to delays in purchasing your dream property. It can also lead some self employed business owners to give up on home ownership altogether. By working with a specialist broker, you can avoid these issues and enjoy a smoother ride.
Get a mortgage in principle
Applying for a mortgage is a very complex and timely process. If you find your dream property first, you may find that the seller has found another buyer by the time your final application has gone through. The solution to this problem is to apply for a mortgage in principle. This is a document from your chosen lender than states they would be provisionally willing to lend you a sum of money, subject to further checks.
With a mortgage in principle, you can start house hunting with confidence. If you find a property you like, you will be able to put in an offer and then begin the final application process if the offer is accepted. A mortgage in principle will often last around 3 months, which should be plenty of time for you to look around a few properties looking for “the one”.
Don’t give up
If there is one piece of advice we would give to self employed mortgage hunters it would be to never give up. It may take a little longer to secure your mortgage, but it will be worth it in the end.
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