If you are thinking of applying for a mortgage, start your preparations early, about 12-24 months in advance is ideal. This gives you time to sort out any potential sticking points that might arise, like overdrafts, or deposit amounts, or even proof of addresses.
This article is going to look at all the paperwork you should prepare in advance of approaching a mortgage lender, to make your life, and theirs, as easy as possible.
Let’s start by saying this – there is a correct way to buy your dream home.
DO NOT, I repeat, DO NOT find the house of your dreams, without having a mortgage agreement in principle. You will only be setting yourself up for disappointment.
The correct order to finding your dream home:
- Do your preparation in advance.
- Approach the mortgage lender with all paperwork in order.
- Get an agreement in principle.
- Find your dream home.
Paperwork to prepare to get a self-employed mortgage
- SA302. Print out a copy of your most recent self-assessment tax return. If you are being super prepared, print out the last few years (if you have them) as evidence of a steady income from your business.
- P60 equivalent. Obviously as a self-employed person, you do not have a P60, so have your accountant prepare equivalent paperwork for you to present as evidence, or use your SA302.
- Three months worth of bank statements. These should detail ALL income going into, and expenses coming out of, your bank account. The whole ‘applying for a mortgage dance’ is essentially the lender reassuring themselves that you aren’t risking and that you can afford your mortgage repayments.
- Overdrafts. Using your overdraft will negatively impact your chances of getting a good mortgage. By preparing 12-24 months in advance, it gives you time to work your way out of your overdraft and back into the black. This will make you a more favourable borrower, and it should improve the interest rates and the products you’re offered too.
- Your partner. If you employ your partner, ensure that they have at least three months worth of payslips. If they’ve only just started working for you, delay applying for a mortgage until three months have passed.
- Deposit. It is possible to get a mortgage with a 5% deposit, but like any mortgage application, the more deposit you have at your disposal, the better the products you are going to have access to. Use the time before applying for a mortgage, to save up as much deposit as you can. Aim for 10%.
- Credit report. Get an up to date credit report to help you establish all of your debts in advance of approaching a mortgage lender, as not disclosing all loans etc could result in you being turned down for a mortgage.
- Proof of address. You need a utility bill or council tax bill from within the last three months. If you operate solely online, then you will need to write to your utility companies and ask them to post you a paper copy.
In summary, preparation is the key to securing self-employed mortgage success.
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