Self-Employed First Time Buyer Mortgage

How much can I borrow for a mortgage if I’m self-employed and a First Time Buyer?

This doesn’t vary whether you are self-employed or employed. As a guideline, most lenders will consider up to four and a half times your annual income.

That is, however, subject to their criteria and the circumstances – if it’s one person or two people applying, whether they’ve got children, any childcare costs and how old they are. Somebody who’s 20 can usually have a longer mortgage than someone who is 50, which affects how much you can borrow.

Credit history and any existing debt and outgoings can also impact how much you can borrow.

How is a mortgage calculated for a self-employed First Time Buyer in the UK?

As a guideline, you can borrow four and a half times your annual income, depending on what you’re looking to do. It also depends how much deposit you’re going to put down, as well. But your income and personal circumstances are the main factors.

What documents do I need to apply for a mortgage as a self-employed First Time Buyer?

There are the standard ID documents – passport, driving licence and then your bank statements. For the self-employed, most lenders ask for three months’ personal and three months’ business bank statements, but that can vary. Sometimes it’s less, sometimes it’s more.

They’d also ask for proof of deposit. The rest will depend on how the business is set up and the lender’s criteria. Usually you need the last two years’ SA302 tax calculations, along with the corresponding tax year overviews. If you use an accountant, they would provide those for you.

If you do your own tax returns and self-assessment, you can get them from your HMRC portal. Occasionally, more for limited companies, lenders may ask for two years’ audited accounts from the accountant.

What if I have bad credit as someone who is self-employed and looking at my first mortgage?

Everybody’s got different views on bad credit. There are specialist lenders for bad credit or credit blips – it just depends on the circumstances and what that blip is.

Rates could be slightly higher from those lenders, depending on what happened, how long ago, the amount and the type of issue. Being self-employed, you’re not treated any differently to an employed person with bad credit. It’s the same across the board for everybody. There are definitely lenders out there to help.

How do lenders calculate my income as a self-employed First Time Buyer?

They will take an average of the last two years’ income. For sole traders, that’s net profit. For company directors they generally use an average of the director’s salary, dividends and net profit.

Usually it’s an average, but if the current year has a lower return than the previous year, they might just use the latest year’s figures. They will also ask for an explanation about why it’s lower.

How can I improve my chances of getting a mortgage as a self-employed First Time Buyer?

This is the same for everybody, regardless of whether you’re self-employed or employed. Obviously, the bigger the deposit, the better. So save up if you can and make sure you pay all your bills on time. Reduce any debt you’ve got outstanding.

Obviously the higher your income, the better, but again, that’s something that might not fluctuate too much. Other than that, the main thing is making sure you pay all your bills and keeping your finances as tidy as possible.

How do I apply for a mortgage as a self-employed First Time Buyer? Can a mortgage broker help?

The right thing to do is use a mortgage advisor, as we can help gather all the information that we’ve just talked about – your income documents and bank statements, etc.

We will discuss your personal circumstances and your finances, and what your preferences are. We ask what you’re looking for from your mortgage and how much you’re willing to pay, how long you want to take it over.

Then we would go and research a comprehensive panel of lenders, which includes the high street banks and specialist lenders. We talk to various lenders across the whole spectrum.

We will recommend a mortgage based on your circumstances, doing all the research. It means you’re not having to trawl through all different lenders’ websites yourself. We gather the information and do the application for you. We submit all the documents, speak to the lenders and address any queries.

We also liaise with solicitors – and just hold your hand through the whole process. Buying a property is daunting, whether you’re a first, second, third or fourth time buyer. That’s why we are there – to help you get through the whole scenario, and we’ll do it all for you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.