Self-Employed Mortgage First Time Buyer

How much can I borrow for a mortgage if I’m self-employed and a First Time Buyer?

Most people want to know how much they could borrow, and it all depends on what you could show you’ve paid yourself. The lenders are looking to use your taxable income as a basis. If you’re a sole trader, that’s your profit. If you’re a director for a limited company, in most cases it’s going to be your salary and dividends.

Lenders will use the gross figure and normally multiply that by 4.5 times, to give you an idea of how much you could borrow. Some lenders might use a smaller multiple, but on average, it’s about 4.5 times whatever you’ve paid yourself.

How is a mortgage calculated for a self-employed First Time Buyer in the UK?

Most lenders take an average of your latest two years’ income. If you’re a sole trader, this is usually an average of your net profit. If you’re a limited company director, it’s usually an average of your basic salary and your dividend payments over the last two years.

Having said that, some lenders will just use the latest year’s net profit for sole traders, and some use basic salary and pre- or post- tax profit for limited company directors. That’s why it’s always important to speak to a broker with access to a comprehensive range of lenders – we could guide you through the process.

What documents do I need to apply for a self-employed First Time Buyer mortgage? How do I prove my income?

Most lenders will use your personal tax calculations. If you’re a sole trader, that means the profit you made after all your expenses.

If you are a limited company director, some lenders will use your salary and dividends, and some will also use your retained profit if you haven’t drawn it all out of the business.

What if I have bad credit as someone who is self-employed and looking at my first mortgage?

Don’t give up hope. Some lenders will consider a mortgage for you.

It really does depend on what the bad credit is. It’s a good idea to have a copy of your credit report, whether you’re a First Time Buyer or not. Share that report with your broker, as it will help us when we’re reviewing your mortgage options.

It allows us to have a conversation with lenders. We could talk to some underwriters directly or get a pre-approval. We have a good working relationship with lenders’ account managers and business development managers, so we could have a conversation and give you an idea of what’s available.

The interest rates they charge may be a little bit higher than your high street lenders, but people could often get a mortgage with bad credit.

How do lenders calculate my income as a self-employed First Time Buyer?

Most lenders will look at the last two years and use an average. It could be your profits or a salary and dividends – it could even be retained profit in your business. Some lenders might just consider your latest year’s figures.

How can I improve my chances of getting a mortgage as someone who is self-employed and a First Time Buyer?

Get in contact with a good mortgage broker as early as possible. Speak to a broker with access to a comprehensive range of lenders and we will guide you through the whole process. Start that conversation as early as possible.

If you’ve got an accountant, there are questions we could ask them. If you don’t have the answer, they definitely will. They understand exactly what we’re talking about on the tax calculations – some lenders still refer to this as an SA302 document. Your accountant knows exactly what that is so we could get the information we need.

How do I apply for a mortgage as a self-employed First Time Buyer? How can a mortgage broker help?

If you’re self-employed, the key thing is to get the documents to demonstrate your income: your tax calculations and your accounts. It’s always good to speak to a broker – we could look through your documents to help establish your budget and how much you could borrow.

We could also talk to lenders beforehand, so when you apply for the mortgage, you know that you’ve got a good chance of actually getting it.

If you were to go direct to a bank or a lender, you’re only going to have access to their rates and their criteria. As brokers we’ve got access to the whole market. We talk to many different lenders, and each one has their own criteria and might lend you more money or less money. So it’s always good to have that conversation.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on [xx/xx/xxxx].