With more and more people in Braintree becoming self employed, it’s becoming increasingly important to understand what lenders look for when processing mortgage applications. The more you know prior to your mortgage application, the higher the chance is that your application will be approved. So what exactly do lenders look for when you’re self-employed?
Show you have a stable income
Typically speaking, lenders are scared of self-employed mortgage applicants. This is because someone who owns their own business has an unstable income, or at least that’s what the lender thinks. Their income could be a lot one week, and not much the next week, which would cast doubt into their ability to service a mortgage. In order to show that you have a stable income you’ll need to retain financial records for at least a year. Some lenders will require more than this so they know you can service the mortgage. Others are more flexible. Bare in mind that if a lender is flexible, that is likely to increase the interest rate, which could make it harder to meet the repayments, or if not, it will cost you more money in the long run. Other lenders are more flexible and won’t require a long financial history. In some cases you will be okay with just providing a year’s worth of financial statements. The only thing you need to be aware of in this case is that you’ll need to save for a higher deposit.
Save for a larger deposit
If you’re living in Braintree, self-employed and trying to take out a mortgage, another option to get your loan application approved is to save a larger deposit. A larger deposit will show good financial management and will indicate to lenders that you have the ability to effectively manage your finances. It will also show that you can live within your income and that you are good with money. By saving money, it shows that you are forward thinking, and a responsible person. If you can, it would be worth saving a regular amount each fortnight or each month, rather than saving odd amounts. By saving a fixed amount, you indicate to lenders that you can mange expenses. That is also likely to have a positive effect on your credit rating.
Increase your income
Okay, if you’re self-employed, you’re probably already trying to increase your income, so this may seem redundant. Lenders tend to favour high income earners. A higher income generally means that you will have some disposable income and can therefore save money. A buffer is essential for the average person who has a job, but when you’re self-employed it’s even more important as you never know what’s going to happen to your income. If you can’t increase your business income, you can take on a second job to boost your overall income. That will also improve your income stability and make you more favourable to lenders.
Of course, these are just some of the ways you can get a mortgage if you’re self-employed. If you’re still confused it is worth speaking to a financial advisor in Braintree, or even a Braintree mortgage broker could provide you with some advice.
At Braintree Mortgage Advice Centre we would be happy to discuss your individual mortgage needs at a time that suits you. Not only do we cover Braintree and the surrounds areas, our advisors have arranged mortgages for clients up and down the UK. Call us on 01376 808200 and make an appointment today