Securing a mortgage as a self-employed individual can feel challenging, but it’s entirely achievable with the right guidance and preparation. Lenders often consider mortgages for self-employed people as higher risk due to income fluctuations, but Active Mortgages has over 15 years of experience in serving the self-employed sector. With a strong reputation as experts in navigating these unique requirements, they’ve helped countless self-employed clients achieve mortgage success. Here’s how you can strengthen your application and secure the mortgage you need with support from professionals you can trust.
1. Organise Your Financial Documents
Getting your paperwork in order is essential. Lenders want to see clear evidence of a stable income, and Active Mortgages can advise on exactly which documents to provide, helping you avoid unnecessary hurdles. Typically, you’ll need:
- Two to Three Years of Tax Returns: Most lenders prefer two to three years of consistent income. SA302 forms (available through HMRC) or a tax year overview will be essential.
- Accounts from a Chartered Accountant: Professionally prepared accounts are critical, and Active Mortgages’ team can recommend best practices for presenting this financial information.
- Bank Statements: Lenders may want recent bank statements for further assurance of your financial habits.
For those newer to self-employment, Active Mortgages has specific expertise in working with lenders open to applicants with one year of accounts, making it easier to find tailored options.
2. Maintain a Good Credit Score
Lenders rely heavily on credit scores to assess risk. Maintaining a solid score demonstrates that you’re responsible with repayments, making it easier for Active Mortgages to match you with the best mortgage options. Consider the following steps, or read our guide to improving your credit score before applying for a mortgage:
- Keep Up with Regular Payments: Missing loan or bill payments can affect your score, so stay consistent.
- Limit Credit Applications: Frequent credit applications can lower your score.
- Check Your Credit Report: Reviewing your credit report regularly ensures that there are no errors affecting your score.
Active Mortgages understands the impact of credit history on mortgage approval and can provide tips on optimising your credit score, so you’re well-positioned for approval.
3. Demonstrate a Consistent Income
Consistency is key for lenders reviewing self-employed applications. Most want to see reliable income, and any drops may cause concern. By maintaining or increasing your income in the years leading up to your application, you’ll enhance your appeal. Active Mortgages has a deep understanding of how income consistency impacts approval and can help highlight the strengths of your financial profile.
4. Save for a Larger Deposit
If you’re self employed a larger deposit shows lenders that you’re serious and reduces their lending risk. Aim to save at least 10% of the property value, but consider more if possible. Active Mortgages has guided self-employed applicants through building deposits strategically, helping many clients secure better interest rates in the process.
5. Prepare a Strong Business Plan
A solid business plan can reassure lenders, particularly for newly self-employed individuals. Active Mortgages recommends including:
- Income Projections: Show your business’s potential to grow and sustain revenue.
- Market Analysis: Demonstrate your understanding of the market and how you manage risks.
With Active Mortgages’ experience in the self-employed sector, they can offer guidance on presenting your business in a way that appeals to lenders, highlighting the stability and potential of your income.
6. Work with a Specialist Mortgage Broker
Navigating the mortgage market alone can be daunting, especially with self-employment complexities. Active Mortgages, with over 15 years of experience in self-employed mortgages, can help connect you to lenders who understand self-employed applicants. Their expertise in matching clients to the right lenders can streamline the process, ensuring you have the best chances of success.
7. Avoid Large Business Expenses Before Applying
Lenders often assess your net profit, so holding off on large business expenses until after your mortgage application can be wise. Active Mortgages understands how these financial decisions impact your borrowing power and can provide tailored advice on optimising your accounts for the best results.
8. Consider a Joint Mortgage
If you have a partner or family member with a regular income, a joint mortgage can make your application stronger. Active Mortgages has extensive experience helping self-employed clients explore this option, guiding you through the benefits and how it may improve your chances of approval.
9. Prepare for Affordability Checks
Alongside proving your income, lenders conduct affordability checks to ensure you can manage mortgage payments and other expenses. Active Mortgages can help you organise a clear overview of your monthly expenses, debts, and spending habits, so you’re fully prepared.
10. Be Transparent
Open communication is essential. By being transparent with your financial history and goals, you build trust with lenders. Active Mortgages values honesty in the mortgage process and encourages clients to provide all relevant documentation quickly, enabling them to advocate for you confidently.
Trust the Experts at Active Mortgages
Getting a self-employed mortgage doesn’t have to be complicated. With over 15 years of experience serving self-employed clients, Active Mortgages has the knowledge, expertise, and commitment to make the process as smooth as possible. By choosing experts who understand your unique needs, you’ll have the guidance and confidence needed to navigate your application.
