A mortgage is a big responsibility, and it has a lot to do with your employment status. Yes, the employed fund seekers have a set of formalities and procedures on the affordability front. The situations become a bit unpredictable when one is self-employed.
There are a few reasons due to which self-employed people need special attention on the mortgage.
- Many lenders act reluctant and consider only employed (not self-emp.) applicants.
- The income of a person with his earning source is usually challenging to prove because of its volatile nature. The earning happens but sometimes in a good figure, sometimes in a small number. It gives the lender anxiety with a question in mind ‘what next’. Does it mean what if the next month, your business or whatever work gets into loss?
- Self-employed people usually do not get the guarantor quickly.
- Sometimes mortgage providers do not understand the type of business and hesitate to lend money.
Tips for borrowing funds smoothly through mortgage
After you have gone through the above problems that a person may face here are few tips. You should read them thoroughly if you are in the same boat.
Organise your accounts to prove the financial efficiency to the lender
Keep your accounts ready and presentable all the time. An independent person has many types of financial responsibilities that are more in numbers as compared to the one who is in the job.
- Invoices
- Taxes
- Dividend
- Expenses
- Bills etc. etc. etc.
The list of the creditors/liabilities for a self-employed could be longer than a person in any other type of employment.
It may sound odd, but this is the only practical thing to do. Start organising your accounts much before you apply for the loan. The providers of mortgage for self-employed love to see flawless finances, and they are always ready to keep a hold on the right customer. Try to be that one.
By the way, few loan companies may want to see an accountant who takes care of all the money matters. His absence may make them feel that you are not very serious about your fiscal responsibilities.
Maintain the grace of credit score performance
Oh yes, it is the critical player in your mortgage game. The whole money world revolves around the tricky numbers of credit score. A good or excellent rating can bring all significant financial opportunities. The moment it starts slipping into the fair and bad credit zone, oops! The mess begins taking shape.
Here is a table that shows the possibilities of loan approval according to the credit rating. Also, read the possible solutions according to the status.
| Credit score | performance | Mortgage approval chances |
| 961 – 999 | Excellent | Great, almost 100% chances of approval due to your strong repayment capacity. |
| 881 – 960 | Good | Chances are promising if you keep firm control on the payback capacity against the loan amount. |
| 721 – 880 | Fair | Situations can be a bit tensed due to not so good, not so bad financial stand. Income and additional earning backing are the prime pillars. |
| 561 – 720 | Poor | This is a stressful situation due to the spoiled debt-to-income ratio. To make the chances of approval, you need to improve financial behaviour by paying the debts on time. Enlarge the limits of annual profits earned. Best is to arrange collateral and pair it with the guarantor. |
Note: Guarantor is a necessary condition in whatever credit score situation you are.
Get assistance from a broker
You must have read many advertisements with the ‘no broker’ required tag, but to be practical, they know the industry in totality. They find out the pearl from the deepness of the ocean that is difficult and sometimes impossible to find. Their expertise sometimes brings a solution for even the most hopeless situation.
There are several reasons to work on this option –
- The brokers can give an unbiased suggestion. No lender tells that the other lending company has a more beneficial deal for you. A broking company focuses precisely on the concerns of the borrower and tries to provide the most suitable deal.
- The brokerage knows the remedies for difficult circumstances – for example – complications in attaining funds due to self-employment tag.
- You can get many options on a single platform, which saves A LOT OF time and energy.
- They broking companies like Shine Mortgages, Manchestermoneyman, FirstMortgage, etc. (the genuine one) can prevent you from the fake lenders.
- Brokers know the nook and cranny of the industry, and they can tell about the latest changes in the lending rules. Such things are not possible to understand from the lenders, especially if something goes against their profit margins. For example, what is the capped rate and what are the new policies on the charges, etc.?
Conclusive lines
The above tips are lucrative in every sense. They cover the suggestion in almost all type of financial and credit score situations, the two most important aspects for a self-employed. Pay heed to all of them and work to trim off the circumstances that may hamper your way to the attainment of the mortgage.
