If you’re self employed and looking for a mortgage, you may have been told that you need to have at least 2 years of self employment under your belt. While this is true for most lenders, there are some who may consider your application if you’ve only been self employed for 1 year.
To increase your chances, you need to present a strong and positive picture of your business and income stability. Lenders will look at factors such as your industry, previous employment history, and whether your turnover matches the income you’re trying to use for your application. Whether you’re a sole trader or limited company, the paperwork required may differ. Keep in mind that lenders will likely ask for your SA302, tax year overview, and business bank statements.
A recent example where we’ve been able to help a client:
Mr and Mrs approached us to see if we could help them purchase their first home. They have been renting for a number of years, but their landlord has decided to sell the property. Mr had only been running his scaffolding for just over a year and were told that they would struggle to get a mortgage after their bank said they couldn’t help. Therefore, understanding whether they could get a mortgage was very important to them given they didn’t really want to rent another property.
We sat down with them and went through their circumstances, we discussed the documents that we would need from his accountant to establish what a lender could use to support their application. Having obtained his accounts and tax returns, we could see that the company had been very successful in just its first year of existence however he left money in the business and didn’t draw it all via dividends. We were able to use his both his director’s salary and the company’s net profits to support their application as this showed a higher income than his tax returns.
Using his company accounts rather than his SA302’s, meant that they were able to borrow a lot more than they had originally thought and buy a home big enough for them and their family.
Being able to use these figures has meant they have been able to apply to purchase their first home together and move in before their landlord sells the property that they are currently renting.