Navigating the intricate world of homebuying as a freelancer can often feel like venturing into uncharted territory.
With fluctuating incomes and non-traditional employment structures that defy the norms of a 9-to-5 job, the question frequently arises - can a freelancer successfully secure a mortgage, especially given the current risk averse lending climate?
The good news is, absolutely yes. However, embarking on this journey comes with its unique set of challenges and requirements, demanding a deeper understanding and diligent preparation.
This comprehensive guide is meticulously tailored to freelancers who are aspiring homebuyers, property investors or simply looking for a better mortgage rate. In short, any freelancer seeking clarity and direction in the somewhat murky waters of the mortgage process should read on and act.
Can a freelancer get a mortgage?
The short answer is a resounding yes, freelancers can indeed secure a mortgage. Cleerly’s Mortgage Consultants have been helping freelancers for a number of years.
However, the path to approval may require a bit more information and documentation compared to salaried employees, as lenders will scrutinise your income stability, and reliability, more closely.
Gaining a solid understanding of mortgages for freelancers will avoid unexpected surprises when time is of the essence, and can significantly demystify this process to avoid a lot of stress.
Understanding Your Financial Situation
The short answer is a resounding yes, freelancers can indeed secure a mortgage. Cleerly’s Mortgage Consultants have been helping freelancers for a number of years. However, the path to approval may require a bit more information and documentation compared to salaried employees, as lenders will scrutinise your income stability, and reliability, more closely.
Gaining a solid understanding of mortgages for freelancers will avoid unexpected surprises when time is of the essence, and can significantly demystify this process to avoid a lot of stress.
Will Mortgage Lenders View Me Differently?
Whether you identify as a contractor, a freelancer, or self-employed, mortgage lenders tend to categorise you into a similar pigeon-hole.
This often means you’re considered a higher risk compared to traditionally employed applicants due to the inherent variability in your income. But don’t be discouraged by this perspective.
This is precisely where freelancer mortgages, mortgage underwriting designed to assess freelancers, come into play, offering specialized solutions that respect the ebb and flow of freelancer income, acknowledging the unique financial profiles of individuals with non-traditional income streams.
How do freelancer mortgages work?
Freelancer mortgages are innovatively structured to accommodate the unique financial profiles of individuals with non-traditional income streams. Unlike standard mortgages, these products consider more than just your annual income; they look at your overall earning potential, the stability and predictability of your income, and your professional track record. This approach allows lenders to get a holistic view of your financial health and earning capacity.
Acquiring a mortgage as a freelancer in the UK hinges on several critical factors that lenders will examine closely.
Engaging a specialist mortgage broker can provide invaluable support throughout this process, leveraging expert insights and access to lenders amenable to freelance income.
How to get a freelancer mortgage?
Many contracting professionals ask us ‘can I get a mortgage as a freelancer’? The answer is yes you can, but engaging a specialist mortgage broker is crucial when seeking a contractor mortgage. A contractor-specialist mortgage broker will have the expertise and experience to navigate the complexities of contractor mortgages, ensuring you find the best deal tailored to your unique circumstances. An independent broker should also have market access, giving the freelancer the best chance of securing the most competitive mortgage. The steps we cover will prepare you for a successful mortgage application when you need it, and remove a lot of uncertainty about whether you get the money.
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Proof of income stability
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Lenders prefer to see at least two years' worth of tax returns and tax calculations, alongside bank statements and invoices that substantiate your earnings, demonstrating a consistent flow of income. Cleerly can access lenders who can work on one year of income proofs, and even some that will work on 6 months in certain scenarios.
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A good credit score
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Demonstrating financial responsibility through a robust and well-managed credit history is crucial. This indicates to lenders that you are capable of managing your finances effectively and making timely payments.
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Deposit size
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A larger deposit (or equity if you are remortgaging) not only lowers your risk profile in the eyes of lenders but can also afford you more competitive mortgage rates. If you’re buying. saving for a substantial deposit could be a game-changer in securing your mortgage. Gifted deposits from family achieve the same outcome of lower rates and lower risk for the lender.
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Freelancing tenure
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A stable freelancing career spanning at least two years, featuring consistent work and few gaps, will bolster your application, as it showcases your ability to sustain a steady income stream. It makes future affordability easier to predict for a lender, which puts you on the path to a successful application.
How to Improve Your Chances of Getting a Mortgage as a Freelancer
Enhancing your mortgage viability as a freelancer involves adopting several strategic approaches:
- Maintain a good credit score to signal financial reliability to potential lenders. Register for a credit referencing service in the months leading up to a mortgage application so you can see what lenders see when they run a credit check.
- Save for a larger deposit to significantly influence lenders’ decisions positively and secure better loan terms. The new mortgage payment will also be more comfortable to manage as a result.
- Consult a certified accountant for complex finances to ensure documentation is thorough, accurate, and in order. Lenders will want to know that the accountant has the right qualifications to vouch for your income, so ensure they are suitably accredited before appointing.
- Clear or reduce any outstanding debt to improve your debt-to-income ratio, making you a more attractive candidate for lenders.
- Build a solid work history, demonstrating consistent and profitable engagements which will attest to your financial stability. Large gaps indicate there may be periods where you struggle with making mortgage payments in the future.
- Demonstrate consistent working patterns to assure lenders of your ability to maintain a stable income. Income volatility is regarded negatively unless you can demonstrate a large savings buffer to cater for lean income periods.
- Partner with a specialist freelancer mortgage broker who understands your unique position and can navigate you accurately through the complexities of a freelancer mortgage application, offering tailored advice and solutions.
Want to Find Out More About How to Get a Mortgage as a Freelancer?
Securing a mortgage as a freelancer is undoubtedly achievable, requiring thorough preparation, understanding the nuances of freelancer mortgages, and sometimes, the support of a bit of expert guidance. At Cleerly, our team of specialist mortgage consultants is fully equipped to assist you in navigating through the freelancer mortgage application process seamlessly.
Whether you are poised to make your first home purchase, looking to expand your property portfolio, or secure the best possible rate on an existing loan, Cleerly’s freelancer specialists are here to ensure your mortgage experience is as smooth and successful as possible.
Eager to find out more? Contact Cleerly today and ensure your mortgage process is in trusted hands.