The most important factor determining your approval will be your ability to prove a steady income.
Without at least three years of accounts to provide your mortgage lender, you’re likely to be deemed too much of a risk, at least while also carrying a bad credit score.
If you’re self-employed, mortgage providers are keen to see as much proof as possible that your income is steady.
Self-employed applicants are generally viewed as riskier prospects because their income isn’t guaranteed. It’s up to you to prove otherwise.
You can do this with your SA302 forms. These forms detail your income for the year and how much tax you paid on it. They are issued by HMRC after you’ve submitted a paper tax return.
Alternatively, you can use accounts certified and submitted to HMRC by a qualified accountant.
Self-employed applicants will need at least one year of accounts to be considered for a mortgage. Realistically, if you have bad credit, you’ll need at least three years of accounts.
You’ll also need to provide proof of identity, proof of address, bank statements and all the other documents required from employed applicants.
Mortgage lenders will check your credit report as part of their overall assessment of your creditworthiness. The higher your credit score, the easier you’ll find it to be approved for a great mortgage deal.
However, it could be harder if you’ve struggled with serious debt in the past, and have been issued with defaults, CCJs, IVAs, bankruptcies or debt management plans. These will damage your credit score and your chances of being approved for a mortgage. Many lenders will flat-out refuse applicants who have these on their credit report.
In this scenario, it’s often necessary to work with lenders that specialise in offering deals to applicants with bad credit. You can check your current credit score here.
In some cases, it may be more cost-efficient to repair your credit score and apply for a mortgage from a traditional lender in the future.
Self-employed applicants who are struggling with bad credit are recommended to work with a professional mortgage advisor. These individuals will be able to recommend the lenders who work with people in their situation.
This can save them a lot of hassle and prevent them from harming their credit score by applying to lenders who will automatically reject them.
You may still need to work with a specialist lender, providing at least three years of accounts to prove your creditworthiness.
If you work in the construction industry, it’s worth registering with the Construction Industry Scheme (CIS) and applying for a CIS mortgage.
With a CIS mortgage, you’ll be eligible to borrow more money because your affordability is based on net income, rather than net profit. What’s more, CIS mortgage providers tend to offer generous rates, even if you have a poor credit score.
You’ll need to provide CIS paylsips for the last six months to be eligible for these mortgages.
Here are some tips to help ensure you’re in the best shape to be approved before submitting your mortgage application.
Response | 55+ | 45-54 | 35-44 | 25-34 | 16-24 |
|---|---|---|---|---|---|
| No | 93.07% | 87.72% | 83.05% | 76.4% | 64.08% |
| Yes | 6.93% | 12.28% | 16.95% | 23.6% | 35.92% |
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