Documents Needed for a Self-Employed Mortgage

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There are no specific mortgage products out there for the self-employed yet there are however specialist lenders who understand your specific career path. You will need to provide different documents from a PAYE employed applicant and ensure that they are all prepared alongside your mortgage application.

Which specific documents will I need?

You will need to provide the standard documentation as everyone else. This includes,

  • Bank statements
  • Council tax bills from the past three months
  • Utility bills
  • Passport
  • Driving License

How do I prove my income?

The way in which you prove your income will be based upon what type of self-employed you are. You should aim for at least three years’ worth of accounts although more lenders are becoming slightly more flexible due to Coronavirus. 

Sole Trader

If you prefer to work and reap the rewards alone then you will need to have an accountant on hand to help you when it comes to your taxes. You will need to declare your earnings on a self-assessment form for HMRC to determine how much tax you owe. You will receive an SA302 form outlining your income and tax paid which is what a lender wants to see.

Partnership

As one side of a company, you need to provide your share of the net profits as well as any retained profits and dividends. You may need to find a specialist lender if you wish for retained profits to be included in the calculations as not all lenders will accept them.

Limited Company Director

You need to show lenders your Director’s salary as well as any dividends that you have paid yourself. If you have retained profits you may need to seek a specialist lender.

Contractor

Gather as many previous contracts as you can as well as any upcoming work. If you are on a day rate, then lenders will multiply this out to work out an estimated annual income.

How do I go about getting a mortgage if I am self-employed?

You should try to save up for as much of a deposit as you can, usually lenders expect at least 10% of the property purchase price. Coronavirus has had a knock on effect on the mortgage market and it has become slightly more difficult for self-employed mortgage applicants to find a reasonable deal.

You need to gather all the documentation you need and make sure your finances are in order. It is important to come across as organised as you can to a lender in every sense so that you are deemed a low risk borrower.

You need to gather all the proof of your income as far back as three years – lenders are becoming more flexible to how many years’ worth you need to provide because of COVID-19 but the more you can provide, the better.

Any debts or black marks in your credit score will be exploited during the affordability check and credit check so make sure you do not owe any debts out and that your accounts are settled. You should make sure your details are up to date on the electoral roll.

You should speak to an accountant as there will be things that you can do in order to get your finances in order and ensure you get the mortgage you are wanting to get. You should focus on maximising your income as opposed to retaining the profits as this will boost your application and the amount you could potentially borrow.

The way in which you apply may differ depending upon what you are looking for in a mortgage. Lenders want to look at your taxable income and ensure you have paid all you should over the tax years. You need to make sure that you have got your finances together when applying for a mortgage.

Approach a Mortgage Broker if you are not sure on where to begin. It can be daunting as a self-employed applicant trying to navigate through the mortgage market and it is changing all the time. Mortgage Brokers are there to help with mortgage applications and to help you understand what you are getting into.

How can a Mortgage Broker at the Mortgage Advice Centre help me?

Here at the Mortgage Advice Centre, we are authorised and regulated by the Financial Conduct Authority meaning we are qualified to give you the advice you seek. We can help let you know what you will need to gather in terms of documentation depending on your circumstance.

As a self-employed mortgage applicant, it can be worth speaking to an expert as your needs and positions are going to be very specific to your situation as opposed to a PAYE applicant. There are specialist lenders out there who understand your career path more and they can be worth approaching over high street mortgage lenders.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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