Home Loan Help for the Self-Employed
Category Buyer Advice
Changing economic circumstances and new lifestyle expectations mean more and more people these days are self-employed, as business owners or as freelance specialists who work on contract for a series of clients.
But even though many of them are high earners, they often find it difficult to get home loans, thanks to the fact that most banks still regard them as higher risk borrowers than corporate or public sector employees.
However, if you are self-employed, you should not give up hope just yet, says Berry Everitt, CEO of the Chas Everitt International property group. “There are ways for entrepreneurs to improve their chances of being granted a loan, the first being to get advice from an experienced mortgage originator on what size loan to apply for and how to first resolve any credit record issues that could count against you.”
Secondly, he says, if you are self-employed you should not even think of applying for a home loan unless you have all your business and personal financial administration up to date. “Remember, applicants in ordinary employment can usually provide pay slips, and income can be further verified by contacting their employer. With self-employed applicants, there are no third parties to provide such verification so lenders have to fall back on other proofs of income – and indicators of the stability of that income.
“So before you get ready to fill out that bond application, you should assemble all the supporting documentation that is likely to be required, including your annual financial statements and tax assessments for the past three years, bank statements and a cash-flow summary for the past six months, the most recent three months’ management accounts and a copy of the lease if you rent your business premises.
“You will also need a certified copy of your ID, a letter from your accountant attesting to your monthly income and a statement of your domestic income and expenditure.”
Writing in the Property Signposts newsletter, Everitt also says you will greatly improve your chances of being granted a loan if you have cash available to pay a deposit of more than 10% of the purchase price of the property you would like to buy.
“Lenders are much more inclined to grant loans to those who demonstrate financial discipline by saving a deposit and come prepared to invest at least some money in their own properties.”
Issued by Chas Everitt International
Author: Barry Davies