Self Employed

What You Need to Get a Mortgage

 

Self-employed individuals, independent contractors, and freelancers have a harder time obtaining a mortgage following the credit crunch, but it’s still feasible. Find out how to acquire the best mortgage for your situation with us at Dartford Mortgage Centre if you are self-employed, want to purchase a new house, or are wanting to refinance. First-time buyers and current homeowners have found it increasingly difficult to obtain a mortgage over the past few years, but the self-employed have been particularly hard hit.

The main modification for independent contractors is the requirement that you provide evidence of your income to any mortgage lender you approach. The majority will demand to see two years’ worth of accounts or tax returns. The better, the more accounts you can display. You’ll demand…
  • accounts for two years
  • a bookkeeper
  • Regular work history and a sizeable deposit
  • excellent credit standing

 

Can You Get a Mortgage?

Yes, you can get a mortgage if you’re self-employed. In general, you’ll need to prove two years of income history from your self-employment with tax returns.

 

Is It Harder to Get a Mortgage?

Yes, it can be harder to get a mortgage if you’re self-employed. You’ll need to provide more documentation than someone who has had the same W-2 employment for several years. Some lenders do not work with self-employed individuals because of the increased underwriting requirements.

How Much Income History Do I Need ?

The longer you can prove income history for self-employment in the same industry, the more likely you are to be approved for a mortgage. As a general rule, you’ll want to have at least two years of documented self-employment income at or above the level you need to afford the loan you want.

 

Are Self-Employed Mortgages More Expensive?

Not necessarily. Make sure you’re getting the best deal possible by getting pre-approved quotes from multiple lenders and comparing loan estimates.

 

The Bottom Line

If a W-2 employee loses a job, their income will drop to zero in the blink of an eye in the absence of unemployment insurance (UI) benefits. Those who are self-employed often have multiple clients and are unlikely to lose all of them at once, giving them more job security than is commonly perceived.

 

Of course, self-employed individuals are already used to having to work extra hard to file additional tax forms, secure business licenses, get new clients, and keep the business running. Armed with a little knowledge and patience, they can also find ways to qualify for a self-employed mortgage.