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Self-Employed Mortgages For A First-Time Buyer: Everything You Need To Know

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As a first-time homebuyer, navigating the world of mortgages can be daunting. The process can be even more intimidating if you are self-employed. However, being a freelancer or small business owner should not exclude you from purchasing a property and fulfilling your dreams of homeownership. It is possible to secure self-employed mortgages that enable you to buy your own home and afford to keep the monthly repayments.

To help you understand how much you can borrow we will provide you with everything you need to know about self-employed mortgages as a first-time buyer. We will explain how much you can borrow, how to calculate the amount you can borrow, and what is necessary to ensure that your application process is a successful one.

The Importance Of Financial Stability With A Self-Employed Mortgage Application

The first thing to understand when applying for a self-employed mortgage is that lenders are primarily interested in your financial stability. They need to know that you have a steady income and can afford to make timely repayments. To provide evidence of financial stability, the following documents are usually required: tax returns, bank statements, and credit history. Lenders typically want to see two to three years of business accounts, indicating consistency and reliability in your earnings, however, it is possible to apply for a mortgage with just one year of financial evidence. Also, having a robust credit score increases your chances of getting approved for a mortgage.

Understand How Much You Can Borrow Before Submitting An Application

Calculating how much you can borrow is crucial before applying for a mortgage. The amount you can borrow depends on several factors, such as your income, the type of house you want to purchase, and the amount of deposit you have. Generally, lenders look at your income as a multiple of the amount you want to borrow.

For instance, historically, lenders have used between three and five times the applicant’s annual income, and this can vary depending on your circumstances. Another factor to consider when calculating the amount you can borrow is whether you have any outstanding debts, such as credit cards or loans. These debts may limit your ability to take out a mortgage as they may indicate to the lender a history of poor financial management.

When it comes to self-employed mortgages, having a larger deposit can work in your favour. Lenders tend to lower the interest rate and the amount you’re permitted to borrow when you have a higher deposit. This is because a large deposit indicates less risk for the lender. Therefore, if you are self-employed, it is wise to save as much money as possible for your deposit.

Seek Advice From A Mortgage Professional

Before submitting any mortgage application, it is vital to seek advice from a mortgage broker that specialises in self-employed mortgages. Brokers will offer you guidance on the type of mortgage you qualify for and the maximum amount you can borrow. Additionally, they will help you compare mortgages and rates and may offer insight into the relevant documentation and criteria for each lender. It is vital to remember that securing a mortgage can be a lengthy process and utilising a mortgage broker can save valuable time. Having this professional support can ensure that the mortgage application process runs smoothly and in your favour.

There are many things to consider when applying for a self-employed mortgage, including providing evidence of financial stability, calculating how much you can borrow, having a larger deposit, and seeking advice from a mortgage broker. Although the mortgage process can be overwhelming, there are lenders out there who specialise in lending to self-employed individuals and offering attractive rates. By being well prepared, you can maximise your chances of being approved for your first mortgage and achieve your homeownership dreams.

Still unsure on how best to start with your self-employed mortgage application? Get in touch with a member of our experienced team. We are ready to help in any way that we can.


Active Mortgages - The UK's Leading Mortgage & Finance Specialists

Self Employed Mortgage Guide

Buying your dream home is one of the most important steps in a your life, for a whole host of reasons.

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Active Mortgages - The UK's Leading Mortgage & Finance Specialists

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Active Mortgages - The UK's Leading Mortgage & Finance Specialists

Book a call with one of our team to talk about your requirements.