What documentation and proof of income do I need to provide for a self-employed mortgage? – Mortgage lenders will require you to provide proof of income. Usually, they will ask for up to three years of accounts. If you haven’t had your financial reporting done by a professional accountant, you may need them to provide you with financial accounts in the required standard. If you tend to do your accounts yourself, you may need them looked over and certified by an accountant before the lender is willing to accept them. If you are a contractor, you may be required to provide evidence of confirmed contracts.

Company directors will need to show proof of dividends or retained profits. You will also need to provide accompanying SA302 forms, which are provided by HMRC. They confirm how much income you have reported in a particular tax year. If you have submitted your information to HMRC online, then you should be able to print out your SA302 forms directly from the online portal. As part of the necessary affordability checks, you will be required to provide bank statements showing expenditure.

Depending on the lender, this could be anything from three months to a year’s worth of statements. You will also need to provide proof of deposit. In addition to the amount of money that you have, you will need to state where it has come from. For example, you may have saved up from your earnings, or it may have been gifted to you. If the money was a gift, you may have to provide evidence that you aren’t required to pay the money back, otherwise, it will be classed as an expenditure. Additional committed expenditure can impact the amount you can borrow

Download your credit report, make sure there are no errors or correct them. make sure you have no accounts where you owe money, if you are in arrears on any accounts then try and pay them back as fast as you can, don’t miss payments by making sure you have direct debits setup properly, make sure your in the electoral roll, don’t go over any pre agreed credit limits, reduce your debts down as much as possible.

Company directors will need to show proof of dividends or retained profits. You will also need to provide accompanying SA302 forms, which are provided by HMRC. They confirm how much income you have reported in a particular tax year. If you have submitted your information to HMRC online, then you should be able to print out your SA302 forms directly from the online portal. As part of the necessary affordability checks, you will be required to provide bank statements showing expenditure.

Depending on the lender, this could be anything from three months to a year’s worth of statements. You will also need to provide proof of deposit. In addition to the amount of money that you have, you will need to state where it has come from. For example, you may have saved up from your earnings, or it may have been gifted to you. If the money was a gift, you may have to provide evidence that you aren’t required to pay the money back, otherwise, it will be classed as an expenditure. Additional committed expenditure can impact the amount you can borrow

Yes, it is natural for self employed to have fluctuating income, this is why lenders need to be assured of sustainability of your income over the longer term, we are experts at proving this to lenders.  

Obtaining a mortgage requires a host of financial and affordability checks. For self-employed people, it means even more financial hoops to jump through. But there are some things that you can do to increase your chances of being accepted. Put down a larger deposit – the more deposit you can put down the less money you’ll need to borrow and the better the mortgage rate you will get. It really is worth trying to save up more for your deposit as it could improve your chances of being accepted and save you thousands of pounds in the interest of the repayment term. Improve your credit score – correct any mistakes on your credit report and pay off as much debt as you can. Close any old accounts. Ensure that you are on the electoral roll at your current address.  Approach specialist lenders – in theory, self-employed people have the same access to mortgage products as everybody else. Yet there are some lenders who specialise in mortgages for the self-employed. Often, they are better placed to understand the ins and outs of being in self-employment and can offer you mortgage products that others would not. 

The term self-employment covers a range of circumstances. You could be registered as a contractor, sole trader or run your own company as a company director. If over 20% of your income is derived from these activities, then lenders can class you as self-employed for the purposes of a mortgage application

Generally the underwriting process takes at most around 5 to 7 days, there is an initial set of documents that the underwriter would request, depending on the complexity of the case the underwriter may come back and request further information, it could be they want further information on your income, generally this is around proving sustainability, so they could request an accountants reference or we might need to provide a covering letter with more information about your business, we are usually very good an anticipating what the underwriter needs, we’ve been told by many underwriters that we think like they do!  

Your income will be assessed in line with a lender’s specific criteria and how your self-employment is set up. For example, Freelancers/sole traders – net profit. Partnerships – net profit (your share thereof)Contractor – day rate (annualised)Limited company – salary, dividend payments, and retained profitLenders will also use an average of your reported income. For example, if a lender asks for three years of accounts. They will add your income for those three years together and then divide it by three, rather than taking the last year’s figure. So, if over the last three years, your income was £50K, £50K, and £70K, then the lender will average this out for an income of £56.6K per year.

Yes, but it will depend on the severity, how recent it is, and also your deposit. 

This will all depend on how your business is setup, we would usually need accounts or self-assessment tax returns but if you are a contractor then we would also need a copy of your contract. 

If we are talking about your first or next home then it is simple, everyone needs somewhere to live! The other alternative is renting but usually, this is more expensive monthly than buying. If you are buying as an investment then this is trickier to answer. The property may have been a stable investment in the past, but that is no indication of future performance. Typically property tends to yield a reasonable return to comparable alternative methods of investment. 

As we’ve discussed, getting a mortgage when you’re self-employed can be more difficult than a standard mortgage. That’s where Momentum Mortgages can help. We know how to give you the very best chance of securing a mortgage. Our relationships with lenders mean that we know which are more welcoming of self-employed people, who are flexible on the number of years accounts needed, and who can give you the best rates. We do the legwork for you and help you get your finances and paperwork in order. A mortgage application rejection can adversely affect your credit score so if you want to be confident you’ll be accepted before you apply, click here to book a call with one of the team.