Getting a Mortgage or Loan if you’re Self Employed

If you’re self-employed then you may be wondering whether it is possible that you can get a mortgage or loan.

Well, the answers is that yes, it is possible for self employed applicants to obtain a mortgage or personal loan, although recent changes to mortgage lending criteria may mean that it is harder to secure the money you need than it would be for someone who is an employee.

Can you get a mortgage or loan if you’re self employed?

Yes you can. However, changes to Financial Services Authority (FSA) regulations mean that lenders are moving towards a situation where they will want to see proof of your income before they agree a loan.

If you can verify your self employed earnings then you’ll have as much chance as anyone else when you come to apply for a mortgage.

Proving your income

The main problem that many self employed people face when applying for a mortgage is that lenders increasingly require you to prove your earnings.

Employed applicants can use their payslips or P60 to prove their income but self-employed people do not have similar documents. You may be asked to provide audited accounts that show your income over the last two or three years.

The problem here is that your accounts will often not give an accurate reflection of your earnings. Your accountant is likely to have offset as many of your expenses as possible which reduces your net profit but also reduces your earnings for mortgage or loan purposes.

And, if you haven’t been self employed for two years you may not be able to provide the requisite proof of earnings at all, meaning it’s unlikely you’ll be agreed for a mortgage or loan.

Flexible mortgages and loans to help the self-employed

If you are agreed for a mortgage or loan, there are lots of flexible products designed to help self employed applicants.

Flexible mortgage products allow overpayments and underpayments and this makes them ideal for self employed people whose incomes can fluctuate throughout the year. You can overpay when times are good and underpay if you’re going through a quiet period.

What have your experiences been with lenders as a self-employed applicant? Have you struggled to get a mortgage or loan? Is there any advice you’d give fellow self employed applicants? Please share in the comments below.

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