So, you work for yourself — at home or in a small office. And we are very happy for you and the other 15 million Americans who are self-employed. But we know that you are reading this article to learn about mortgages. More precisely, about the so-called “1-year self-employed mortgage”. Is it possible to have a mortgage with a 1-year account, and is this not a myth? Everything is possible! Let’s figure out exactly how.
For whom is a 1-year mortgage available?
- Companies trading for 1 year
- Sole traders self-employed for 1 year
- Self-employed buy to let mortgages
- Businesses with recent changes in company structure
- Mortgages for contractors and freelancers
- Self-employed for 1 year with bad credit
- Remortgages for business investment
How to apply for a 1-year self-employed mortgage
If your accounts are only one year old, you should look for a specialist lender. After all, for most lenders, you will be perceived as a borrower with an increased level of risk. Most often, they refuse people who have been self-employed for less than 3 years.
But don’t worry — specialist lenders are reliable and no different from regular lenders. Simply, they work with different borrowers.
Try to improve your situation with the following solutions:
- Avoid mainstream lenders
- Apply with a specialist lender
- Save for a deposit higher than 10%
- Minimize outstanding debt
- Provide evidence of a healthy business bank account
- Show savings in your account
- Having a good credit score
The type of business you have matters
Lenders will primarily evaluate your income level. The type of business and its profitability are essential factors that will help assess your mortgage affordability. The lender wants to ensure your income is stable and protects itself from risk.
Amount of credit
Most often, self-employed applicants receive a loan worth five times their net income. Remember that lenders cannot predict your income level so that they will operate on your current data. If you have been trading for 15 months, lenders will assess your income for one year + your net income for an additional three months.
Lenders will request your SA302 documents. These can be downloaded online from the HMRC portal or ordered by post. We also recommend preparing additional evidence of income, such as an accountant’s report or final accounts.
What should I do if I have a bad credit history?
You are not alone in this situation. And you can still get a mortgage, although it will be pretty tricky. You must develop a strategy — contact a consultant and find a suitable lender. Also, be prepared to pay a deposit of at least 15% and agree to a higher loan rate.
1-year self-employed mortgage. Conclusion
Nothing is impossible — even when it comes to a 1-year self-employed mortgage. You can still get a mortgage by choosing a specialist lender.
Sign up for a consultation with LBC Mortgage to get comprehensive advice and resolve your credit issues. We approach issues individually and carefully evaluate each client’s case to select the best financing.