Top Tips for Contractors When Applying for a Mortgage
Top Tips for Contractors When Applying for a Mortgage
Blog Article
Contractors face a unique set of challenges when applying for a mortgage. Unlike traditional employees, contractors often have fluctuating incomes, which can make it harder for lenders to assess their ability to repay the loan. However, with the right preparation and approach, contractors can increase their chances of securing a mortgage. Here are some top tips to help contractors through the mortgage application process.
1. Provide Clear Evidence of Income
One of the main challenges contractors face is proving their income stability. Lenders may be hesitant to approve loans based solely on variable income. To overcome this, contractors should provide clear and detailed evidence of their income, such as contracts, invoices, and bank statements. A record of consistent income over the last 12 to 24 months can demonstrate reliability to lenders.
2. Maintain a Healthy Credit Score
A good credit score is essential for securing a mortgage with favorable terms. Contractors should focus on maintaining a strong credit history by paying bills on time, reducing outstanding debts, and avoiding large credit card balances. A higher credit score can make it easier to access better mortgage rates and increase your chances of approval.
3. Save for a Larger Deposit
Lenders may require a larger deposit for contractors due to the perceived risk associated with non-permanent employment. Saving for a larger deposit can not only improve your chances of securing a mortgage but also help you secure a better interest rate. A deposit of at least 20% of the property’s value is often recommended.
4. Work with a Specialist Mortgage Broker
A mortgage broker who specializes in contractor mortgages can be invaluable when navigating the application process. Brokers have access to a wide range of mortgage products tailored to self-employed individuals and contractors. They can help you find the best deal, reduce the time spent on paperwork, and guide you through the process.
5. Be Prepared for a More Detailed Assessment
Since contractors’ income is often less predictable, lenders may conduct a more thorough assessment. Be prepared to provide additional documentation such as tax returns, contracts, and proof of savings. The more information you can provide, the smoother the application process will be.
Conclusion
Applying for a mortgage as a contractor may seem daunting, but with the right preparation, it is entirely possible. By providing clear evidence of income, maintaining a strong credit score, saving for a larger deposit, and working with a specialist mortgage broker, contractors can secure the mortgage they need to purchase their home.