Mortgages for self-employed borrowers: how to improve your chances

Getting a mortgage isn't a quick job. It’s important to start preparing for an application in the months leading up to making one.

Here’s a few tips which could improve your chances of getting it right the first time.

Use an accountant

Employ a certified or chartered accountant to prepare your accounts. Some lenders won't consider applications from self-employed people who don't have up-to-date accounts signed off by an accountant.

While it's common for accountants to legally minimise your declared income so that you pay less tax, this could have an unfavourable effect when you apply for a mortgage, as your accounts will show a smaller profit.

Complete three SA302 forms

SA302 forms provide annual tax calculations, and most lenders will ask for three (one for each of the last three years) when you apply for a mortgage. That said, some lenders will accept two. If you've sent your self-assessment tax returns online, you can print off your SA302 calculations. If you filed your accounts by post, you'll need to contact HMRC and allow up to two weeks for your forms to arrive.

Save for a bigger deposit

The bigger the deposit you've got, the easier it is to get a mortgage at a good rate. Most lenders ask for a deposit of at least 10-20%, and if you don't have a long history of accounts, you could need an even bigger deposit to convince a lender that you're a safe bet.

Get your finances in order

Before you apply for a mortgage, give your finances a spring clean. Boost your credit rating by paying off any debts as soon as they're due, closing dormant accounts, ensuring there are no incorrect entries on your credit report and getting on the electoral roll. You should also be careful about your spending habits in the year before you apply, as all regular outgoings will be taken into consideration by your lender.

Take professional mortgage advice

If you apply for a mortgage and the lender rejects you, it will be recorded on your credit file. This can damage your credit score and, in turn, make it less likely that you get accepted by the next lender you apply to. A whole-of-market will be able to look at your personal situation and advise on the best lenders to apply to based on your credit history.

If you’re looking for someone to help prepare your accounts in preparation for your mortgage application, then please get in touch.

Call us on 01772 925 230