Self-employed requirements for getting a mortgage

• Eligibility: Self-employed individuals, including sole traders, company directors, and freelancers, can qualify for mortgages. Typically, lenders require proof of income stability over at least two years.

• Income verification: You must provide comprehensive financial documentation including tax returns, certified business accounts, SA302 forms, bank statements, and proof of ongoing or future contracts.

• Mortgage amount: Borrowing limits are usually up to 4.5 times your average annual income, based on recent financial history and affordability assessments.

• Mortgage options: Self-employed applicants have access to the same mortgage types as employed individuals, including fixed-rate, standard variable-rate, tracker, discount, and buy-to-let mortgages.

• Improving your chances: Enhance your mortgage prospects by maintaining a good credit score, organising financial documents clearly, saving for a larger deposit, demonstrating consistent income, researching suitable lenders, and seeking professional mortgage advice.

It is possible to get a mortgage when you’re self-employed; however, applying for a mortgage can be more difficult. The reason is that it can be harder to prove you have a reliable income.

Lenders need to be confident that you can afford to repay the mortgage before accepting your application. To do this, they carry out thorough affordability checks, which need to show you can afford the payments now and in the future.

Self-employed people can have unpredictable incomes, and it can be more complex to predict your future earnings.However, if you can provide evidence of several years of accounts, and you have healthy finances and a good credit score, you should be eligible for most mortgage products.

Mortgage lenders will consider you a self-employed applicant if you own 20% or more of a business that pays your main income. This can include:

• Sole traders, where you own and run your business by yourself

• Directors or partners, where you own a business with others

• Freelancers, where you’re hired to work for different companies

How a lender assesses your income will differ depending on whether you are a sole trader, director partner, or the owner of a limited company.

To prove your self-employed income, there are lots of documents you’ll need to provide, including:

• Tax returns

• At least two years of certified accounts

• SA302 forms and tax year overviews

• Between 3 and 6 months worth of bank statements

• Proof of current and upcoming work/contracts

If you are a company director, you will also need to provide proof of dividend payments as part of your income verification process.If possible, provide accounts that have been prepared by a chartered accountant. Lenders favour these as they can be more confident of their accuracy. As well as proving your income, you’ll also need to provide:

• ID documents, including passport and driving licence

• Proof of address, including utility bills or council tax statements

• Statements for any savings or investments

The lender will look at your income and the size of your deposit when working out how much you can borrow.As with employed borrowers, lenders can loan you up to 4.5 times your annual income; however, this will be based on your last few years income evidence rather than your annual salary.

Your affordability is also influenced by things like any outstanding loans, commitments like childcare costs and your general everyday spending.

Use our mortgage calculator to understand how much you can borrow. You’ll need to provide your annual income, deposit amount and regular outgoings to see what sort of mortgage you might qualify for.

Finding the best mortgage deal may require some additional effort when you are self-employed compared to traditionally employed. Lenders often scrutinise self-employed applicants more closely due to variable income and potential financial risks.

Here are some simple steps to help you find the best mortgage deal:

Organise your financial documents

Gather all necessary documents demonstrating your income and stability. These may include tax returns (both personal and business), bank statements, and any other relevant documents. Having organised and up-to-date records will help streamline the application process. If possible, have your accounts prepared by a qualified accountant to add credibility to your reported earnings.

Determine your affordability

Assess your financial situation and calculate how much you can afford to borrow. Consider your current income, expenses, and any potential fluctuations in your earnings. Lenders will want to ensure that you have sufficient income to cover mortgage payments.

Build a strong credit history

Maintain a good credit score by paying bills on time, reducing existing debt, and avoiding new credit applications. Ensure you are registered on the electoral roll, as this can improve your credit score and increase your chances of mortgage approval. A higher credit score will enhance your chances of securing favourable mortgage terms and interest rates.

Research lenders

Shop around and research different lenders who offer mortgage deals suitable for self-employed individuals. Look for lenders experienced in working with self-employed applicants or those who specialise in flexible lending criteria.

Seek professional advice

Consider using a mortgage broker or financial advisor experienced in dealing with self-employed individuals. They can provide personalised guidance and help you navigate the mortgage market more effectively.

Demonstrate a consistent income pattern

Lenders prefer to see a consistent income pattern. If your income has been fluctuating, provide additional documentation or explanations to help the lender understand the reasons behind the fluctuations and show that your income is stable over time.

Save for a larger deposit

A larger deposit can improve your chances of securing a better mortgage deal. Consider saving for a higher deposit to get access to more deals and reduce the amount you’ll need to borrow.

Be prepared for additional checks

As a self-employed applicant, lenders may conduct additional checks to verify your income and financial stability. Be prepared to provide further documentation or answer any queries they may have promptly.

Remember that the mortgage market is constantly changing, and it’s important to stay up-to-date with current rates and offers. By being proactive, organised, and seeking professional advice when needed, you can increase your chances of finding the best mortgage deal as a self-employed individual.

“Millions of people in the UK work for themselves, so you’re not alone when looking for a mortgage as a self-employed borrower. 

It’s true that there are a few more hoops to jump through, but if you can prove your income, there’s no reason you can’t find the right mortgage for you. Speak to one of our expert advisors to talk through all of your options.”

- Jon Bone \ CeMAP-qualified mortgage adviser