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How to Get a Self Employed Mortgage

Advice on Getting a Mortgage for a Freelancer

Dec 26, 2008 Asa Ghaffar

Getting a self-employed mortgage is harder for a freelancer than a salaried person. Lenders usually require three years of self-employed accounts.

A self-employed mortgage is normally possible provided that a borrower has a 20% deposit. However, it will be more difficult to attain than for a salaried employee. The reason for this is the higher risk the freelancer poses to the lender in terms of defaulting on the agreement.

The Self-Employed Mortgage and the Importance of 3 Years of Accounts

The longer the history of being self-employed, the better the chance of a self-employed mortgage being approved. Lenders will analyse the accounts of a freelancer to check revenue consistency and the overall viability of the business.

Self-Certified Mortgage

A self-employed mortgage is possible if 3 years of accounts can be demonstrated. The problem is that many accountants legally under-state earnings to reduce the tax liabilities of the freelancer. This creates the illusion of lower earnings.

However, it may be possible to get a self-certified mortgage if earnings have been under-stated or 3 years accounts aren't available. This allows a borrower to certify that they earn a specific amount, but there is no onus on the borrower to prove it.

The LTV maximum for self-certified mortgages will normally be about 80%. To account for the higher risk, most lenders charge a higher rate of APR. Should bad credit also be an issue it is advisable to seek the services of a mortgage broker.

Mortgage Brokers and the Self-Employed Mortgage

Using mortgage brokers will add about 1% to the amount borrowed, but it could be the difference between approval and rejection. Brokers regularly have useful financial connections and also know who is more likely to approve a self-employed mortgage which minimises credit searches.

Self-Employment and Bad Credit

Bad credit is an obstacle to getting a self-employed mortgage, but it is still achievable. A freelancer with bad credit is more likely to be approved if the self-employed accounts history shows income consistency. A higher rate of APR will be charged to borrowers with bad credit.

Working as a freelancer isn't a bar to getting a self-employed mortgage. The process is generally more complicated so securing the services of a mortgage broker is usually a good idea. Even if 3 years of self-employed accounts can't be provided, it should still be possible to get a self-certified mortgage.

Those that found this article useful may also be interested in reading about Fixed Rate Mortgages - Pros and Cons and Mortgage Insurance - Useful Tips Before Buying.

The copyright of the article How to Get a Self Employed Mortgage in Mortgages/Loans is owned by Asa Ghaffar. Permission to republish How to Get a Self Employed Mortgage in print or online must be granted by the author in writing.