Being self-employed has grown to be a popular and viable option for work for many individuals in the UK, with 4.25 million people in the UK opting for self-employment. With this can come some complications or uncertainties surrounding self-employed individuals.
When it comes to securing a mortgage, one of the most frequently asked questions we encounter at JG Mortgage Services Limited is whether obtaining a mortgage with only one year of self-employment history is feasible.
In this guide, we will discuss in more detail the answer to this well-asked question, so you know what to expect if you are self-employed and have been for just one year.
Continue reading to learn more and to be offered insights to empower yourself as a self-employed individual on your homeownership journey.
Understanding Mortgage Approval for Self-Employed Individuals
In short, you can get a mortgage after being self-employed for one year. However, certain factors can affect the outcome, and we understand that the mortgage approval process can be daunting, especially for self-employed individuals. With the right guidance and support, it doesn’t have to be as daunting for you as you might think.
In this section, you can discover the essential criteria that lenders consider when assessing mortgage applications from self-employed borrowers with one year of self-employment history. Read below to better understand what it takes to secure a self-employed mortgage.
Income Stability and Affordability
Traditionally, mortgage lenders prioritise borrowers with a proven track record of stable income, typically spanning two to three years.
Being self-employed for just one year doesn’t prevent mortgage eligibility. It just means it is crucial to showcase a consistent income stream and the viability of your business, regardless of how long you have been self-employed.
Documentation Requirements
Lenders require lots of documentation to prove your credibility as a borrower. This will include tax returns, bank statements, and business accounts a qualified accountant can help you with this. For those with one year of self-employment, documentation reflecting income and expenses during that period is imperative.
The more thorough you are with your documentation, the better. Ultimately, lenders want to be reassured that they are making a mortgage loan to someone who is reliable and can pay it back. If you can provide evidence of your credibility, then you shouldn’t have a problem.
Demonstrating Viability
Providing self-assessment tax returns, profit and loss statements, and evidence of contracts or invoices can all support your case. This will highlight the sustainability of your self-employed business; proving its success up until the present day will showcase the predictions for its future success and therefore bring peace of mind to the lender.
Credit History and Financial Health
Beyond income, lenders scrutinise credit history and overall financial health. A commendable credit score and healthy savings can boost your mortgage application, irrespective of your employment status.
If you don’t have a good credit score, it will be worth working on that first before you apply for a mortgage if you have been self-employed for a short while. A bad credit score will certainly tarnish how you look to potential lenders, making you appear as a high-risk borrower, regardless of how well your self-employed business has been running for the past year.
Creditworthiness Evaluation
A pristine credit history and careful financial management signal reliability to lenders. This is ideal for planting confidence in your ability to honour your mortgage commitments to your lender.
Savings Accrual
Accumulating savings showcases financial responsibility and provides a financial buffer during uncertain economic times, which reassures lenders about your ability to handle financial ups and downs.
Nature of Self-Employment
The nature and longevity of self-employment can influence mortgage approval. Certain industries may be deemed riskier, necessitating a more comprehensive assessment.
Industry Risk Assessment
Lenders may categorise industries differently based on risk profiles. Highlighting the stability and growth potential can help reduce perceived risks.
Long-Term Viability
Demonstrating the sustainability of your self-employment assures lenders of the continuity of your steady income source.
Navigating the Mortgage Market
Understanding the intricacies of the mortgage market is essential for self-employed individuals seeking financing for their own mortgage.
Specialist Lenders and Mortgage Brokers
Specialist lenders and mortgage brokers are becoming more common as the mortgage market changes and more and more people become self-employed.
The need for mortgages for the self-employed is therefore on the increase. This means more lenders are catering to the unique needs of self-employed borrowers.
Using the services of a knowledgeable mortgage broker can streamline the process for you and help you navigate the mortgage industry to find tailored solutions.
Specialist Lenders
Specialist lenders understand self-employment better and offer more flexible terms. They provide viable options for borrowers with different employment histories, including being self-employed for one year.
Mortgage Brokerage Expertise
Expert mortgage brokers who specialise in self-employed mortgages can speed up the search for you. They’ll make sure you have access to a wide range of mortgage options that fit your needs and are specifically tailored to self-employed borrowers.
Timing Considerations
While immediate homeownership may be tempting, waiting and building a longer history of self-employment can improve your mortgage approval prospects and get you a better rate.
Long-Term Planning
Waiting to apply for a mortgage until you have a more extensive self-employment history can create favourable outcomes. Building a solid financial foundation and demonstrating sustained income can strengthen your application.
If You Are Self-Employed, JG Mortgage Services Limited Can Help You
While securing a mortgage as a self-employed individual with only one year of experience presents challenges, it’s far from impossible – especially with the help of an expert mortgage brokerage such as us at JG Mortgage Services Limited.
With us by your side, and by thoroughly documenting your income, and showcasing responsible financial management, together we can help you navigate the mortgage approval process with confidence as a self-employed individual to help you get a self-employed mortgage.
At JG Mortgage Service Limited, we can put you in touch with the right lenders who specialise in helping self-employed individuals find the right mortgage. We know a wide scope of different lenders, and our team will take the time to get to know your needs so that we can make the mortgage-finding process a lot easier for you, helping you find a mortgage that fits your situation.
If you are ready to start your homeownership journey, reach out to our experienced mortgage advisors today. Let us guide you towards achieving your homeownership aspirations, irrespective of your self-employment tenure. You can call us today on 01244 738422, or email us at info@jg-mortgage.com, alternatively, you can fill out the contact form that can be found on our website.
