Being self employed can make applying for, and securing a mortgage a bit of a minefield – there’s a lot more you have to consider and weigh up when you’re not working a standard 9 to 5. So in this edition of home ownership for first time buyers we help you figure out what part of your wages count towards your mortgage.
Hi Samantha, the number one place to start is to simply get all of your finances in complete order. Personally, I keep track using a simple Excel spreadsheet with notes of all my incomings/outgoings and expected costs throughout the upcoming month. This means you’re always on top of your costs and will have tangible evidence to present to a lender.
In your case, most lenders will be looking for a similar accounting history to that of a person who is self-employed. As such, we would recommend having at least 3 years of financial history tracked. Some lenders may consider just a single year or two, but the more information you can provide, the better.
Tax returns, such as the SA302, are perfect ways to show how much you have declared to HMRC and are vital in getting yourself a mortgage if you’re self-employed or freelance, so be sure to keep on top of all that too!
Nope. Whether you’re self-employed, freelance or a contractor, you CAN get a mortgage as a first-time buyer. It is however, more of a challenge than for someone who is in ‘normal’ salaried employment.
In principle, you have access to all the same lenders/brokers/mortgages as everyone else in the pool, you just have to fight against the current a little more – so make sure your finances are in check, as outlined in Samantha’s earlier question.
As long as you supply information correctly, you won’t be paying any extra than anyone else. So save as much as you can for your deposit, manage your credit score (using this handy advice) and speak to an experienced mortgage broker about your situation to ensure you have a stress-free experience!
Commission and performance bonuses are often viewed sceptically by lenders. Your flat-basic salary 100% count towards your application, but proving your financial stability further can be tricky.
Some lenders will only accept monthly, quarterly or annual bonus payments. The key for your Lucie, is consistency. The more regularly you receive similar commission payments, the more likely it is that a lender will consider these values towards a mortgage.
Be prepared to run into roadblocks with your application though. For example, lenders likely won’t consider your entire commission, if the amount is larger than your basic salary and some lenders will only count a certain percentage of your commission towards repayments. So try not to lean too heavily on your commission when applying for your initial mortgage.
Hope that helps Lucie!
Wages and mortgages are intertwined and you need to keep on top of your earnings in order to lodge a successful mortgage application.
Order your finances appropriately, keep a tax return to hand, and be sure of the rules surrounding commission and bonus payments.
For everything else, and for more information about how your incomings influence your first-time buyer mortgage, read through our other posts, or give us a call! Me and Ray will be more than happy to set you up for mortgage success!
Feel free to check out the rest of our series here. Take care!