For self-employed people, the dream of your own home has always been more difficult to achieve compared to salaried peers. This has got even harder over the past year as the BBC report mortgage lenders are refusing to lend to those self-employed workers who took grants during the pandemic. While it can seem like a daunting task for self-employed people to get on the property ladder, there are ways to tackle the disparity and get a good deal on home finance.
Bad credit arrangements
One of the stumbling blocks for self-employed people is being able to properly demonstrate their income levels. A lack of salary and the problems associated with taxation create poor credit scores and a difficulty with showing lenders the money is there. To counter this, the UK has created a British version of the USA’s FHA mortgage, a product designed to help those without credit to win the approval of lenders. According to HousingWire, the Help To Buy scheme mirrors these protections and benefits and is a great first step for the self-employed as it demonstrates a commitment to saving and also builds larger deposits.
Business shares
Self-employed people should, by law, be registered as at least sole traders. This can be beneficial in obtaining a mortgage. As The Times highlights, many banks opt to use company data when determining if they will lend. What does that mean? If you are the proprietor of your business and can show turnover that supports both your overheads and a salary for yourself that can meet mortgage payments, banks may look favourably upon this. How these accounts are compiled can be important.
Professional help
Having a chartered accountant at every step of your journey is a powerful way to ensure that the banks will look favourably on your application. Indeed, Forbes notes that many banks will demand that any accounts are made up by an accountant as an absolute minimum. Putting money aside to ensure your books are well-kept can help you to stay organised in your own life as well as present a proper front to the relevant parties.
Self-employed people have to jump through extra hoops and be that much more organised than salaried employees. Otherwise, they will falter at every hurdle in home purchasing. While unfair, there are options to help you bridge the gap.
