Self-Employed Mortgage First-Time Buyer

Can you get a mortgage if you are a self-employed first-time buyer?

Yes, it’s possible to get a mortgage as a self-employed first-time buyer. This typically depends on meeting income criteria and passing a credit score. Being self-employed does not necessarily present a barrier to getting a mortgage.

How does getting a mortgage as someone who is self-employed and a first-time buyer work? Is it difficult to get a mortgage when you are self-employed and a first-time buyer?

The process for getting a mortgage when you’re self-employed is the same as anyone else applying for a mortgage.

You would typically need to provide relevant documents. A mortgage broker would assist in determining your income from these documents, identifying suitable lenders, and helping to secure a suitable loan amount and a favourable deal.

While it is not inherently difficult, different lenders have varying criteria, which can lead to some limitations. Providing as much information as possible can help facilitate the process and achieve an appropriate outcome.

How many years do you have to be self-employed to get a mortgage as a first-time buyer?

A minimum of one year of self-employment is typically required. Two years of self-employment is preferred by many lenders. However, some lenders may consider applications with only one year of self-employment, though the options might be more limited in such cases.

What types of mortgages are available for first-time buyers who are self-employed?

Generally, all types of mortgages and schemes are available to self-employed individuals. The availability often depends on whether a lender within a particular scheme offers self-employed mortgages.

A mortgage broker can help determine what can be lent to you based on a lender’s income assessment criteria and guide you towards the most suitable lender and schemes for your specific circumstances.

How much deposit will I need for a mortgage if I’m a first-time buyer and self-employed?

The typical minimum deposit is 5%. Generally, a larger deposit can provide more options. While 5% is a common minimum, there have been discussions about potential options for individuals with less than a 5% deposit.

How much can I borrow for a mortgage if I’m self-employed and a first-time buyer?

The amount you can borrow can vary based on your income and other factors. Most lenders might offer up to four and a half times your income. Some lenders may extend this to five times, five and a half times, or even six times your income.

Providing comprehensive information can help determine if these higher affordability options are available. It is worth noting that any existing credit commitments could negatively impact the overall maximum loan amount.

How is a mortgage calculated for a self-employed first-time buyer in the UK? How do lenders calculate my income as a self-employed first-time buyer?

Self-employed individuals typically fall into one of three categories: sole trader, limited company, or partnership.

If you’re a sole trader, lenders commonly review the last two years of your net profit, or sometimes just your latest year’s net profit if they consider one year. Net profit is calculated as your turnover minus expenses, and this figure is used to assess your income tax.

For a director of a limited company, lenders usually consider the director’s salary and either your dividends or your share of the net profit from the company. Lender approaches can vary; some may look at net profit both before and after tax.

If you are in a Partnership, your share of the net profit from that partnership is typically considered.

What documents do I need to apply for a self-employed first-time buyer mortgage? How do I prove my income?

Common documents required for a self-employed first-time buyer mortgage application, applicable to everyone, include:

• Proof of Identification: Often a passport.
• Proof of Address: Typically a utility bill from the last three months, a council tax bill, or a driving licence if not used as primary ID.
• Bank Statements: Three months of personal bank statements to demonstrate income and expenditure.
• Proof of Deposit: Documentation confirming the source of your deposit.

For self-employed individuals, proof of income typically requires:

• Tax Calculations: Your last two years of tax calculations (often referred to as SA302s, now commonly called tax calculations).
• Tax Year Overviews: Corresponding two years of tax year overviews to align with the tax calculations.
• Company Accounts: If you operate as a limited company or a partnership, your last two years of company accounts are generally needed.
• Business Bank Statements: Lenders may request three months of business bank statements to confirm consistent business turnover.

How can I improve my chances of getting a mortgage as someone who is self-employed and a first-time buyer?

There are several actions that can improve your chances of getting a mortgage, particularly for self-employed individuals:

• Keep Good Records: Ensure easy access to your tax calculations, tax year overviews, and company accounts.
• Early Self-Assessment Filing: File your self-assessment early in the year, rather than waiting until the January 31st deadline.
• Timely Tax Payments: Pay any outstanding tax at the earliest opportunity.
• Good Credit Record: Maintain a strong credit history by paying bills on time and staying within agreed credit limits.

How do I apply for a mortgage as someone who is self-employed and a first-time buyer? How can a mortgage broker help?

Speak with a mortgage broker who can handle the research and guide you through the process.

At the Mortgage Store, once we have all relevant documentation, we talk our clients through a fact-finding process, then go on to research the right mortgage for them. We’ll then apply for that mortgage for them and take care of everything up to the mortgage offer.

Once the mortgage offer is issued, we’ll keep looking after our clients right up until exchange of contracts and ultimately completion of their purchase.

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