Self Employed Mortgage First Time Buyer

What documents do I need to apply for a mortgage as a self-employed First Time Buyer?

We will take your tax computations or SA302. That’s the document that is generated once you submit your personal tax returns via HMRC. It will outline your taxable income. 

Along with that, you will get something called a tax year overview. Lenders like to see both of those to see you have been paying your tax correctly and on time. 

If you’re a limited company, we can do it via your personal tax return, or we may well ask for your accounts as well. We will also need business bank statements to see the income going in. Depending how long ago you did your accounts or personal tax returns, lenders may want to see that your business has still been transacting well over the last couple of months. 

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

Bad credit is something that we always need to look at. It’s basically assessing what type of bad credit it is and how long it’s been going on for. Is it just a couple of small missed payments or is there more to it, like CCJs or IVAs?

There’s a complete array of bad credit types, and lenders all have different criteria around these. Some will be okay with a late or missed payment, and they may be happy with a CCJ if it’s below a certain figure. 

Bad credit may well require a larger deposit, certainly if you’ve had a large CCJ in the past. But this is the same if you’re employed or self-employed – there’s no difference. 

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

Preparation is important. Have the documents you need available. It’s no different from me asking someone for payslips. They may well have to go on to the system at work to get those payslips or try and find them on emails. 

Getting your tax computations is as simple as logging on to HMRC or dropping an email to your accountant. We need to know what your income is to be able to work out your affordability. 

An important thing to remember is that your personal tax returns have to be done by January 31st. With the majority of lenders, by October/November they will require you to have accounts from the most recent tax year. In October 2023, for example, your 2022 accounts are 18 months out of date – that’s quite a long time not to know how your business has done. 

So, certainly at this time of year you need to get those accounts sorted, even though you may not officially have to do them until January.

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

When you’re self-employed a mortgage broker really comes into their own. We can work out what your optimal income is for specific lenders. 

Certain lenders will take an average of the last two years, so if you’ve done £20,000 last year and £40,000 this year, they will take your income as £30,000. But other lenders will let you take your income at £40,000. 

That’s a massive difference – and vice versa, if your income has fallen from £40,000 to £20,000 it’s best to go for the average.

We identify the income to use for a lender and which lenders to go to. Some are really good for the self-employed and it’s a focus area for them – others don’t feel it’s so important and their criteria may not be as good. 

I’d certainly encourage self-employed people to speak to a broker. We can be so helpful at every step towards buying your first home.

Your home may be repossessed if you do not keep up with your mortgage repayments.