Managing the Complexities of Mortgage Applications for Locums

For many locums across various professions, the dream of home ownership often comes with its unique set of hurdles. This article aims to shed light on these challenges and offer insight into how locums—from doctors and dentists, to nurses, pharmacists, and social workers—can overcome them.

The Unique Challenges Locums Face

As mentioned earlier, there are various reasons why lenders may perceive locums as high-risk borrowers. Some of these include:

  • Irregular income: Unlike salaried employees who have a stable and predictable income, locums' earnings can vary significantly from month to month or even week to week. This fluctuation can make it challenging for lenders to determine whether the borrower will be able to meet their mortgage payments consistently.
  • Financial instability: Since locums' income is not guaranteed, lenders may view them as financially unstable. They may worry that the borrower's income might suddenly stop if they fall ill, take a break from work, or lose a locum contract.
  • Lack of employment history: Lenders typically prefer borrowers with a stable employment history to demonstrate their ability to maintain a consistent income and good credit score. However, locums often have gaps in their employment history, making it challenging for lenders to assess their financial stability.
  • Difficulty providing proof of income: Locums may find it challenging to provide proof of income documents (e.g., employed payslips or self-employed tax returns) that prove all of their income due to the nature of their work. This can make it harder for them to qualify for a mortgage as lenders typically require these documents to determine the borrower's ability to repay the loan.

Tips for Locums Applying for a Mortgage

Overcoming These Challenges

While these challenges may seem daunting, there are steps locums can take to improve their chances of getting approved for a mortgage. Some strategies include:

Proving Income Over a Suitable Length of Time

One of the primary obstacles that locum professionals encounter is demonstrating their income over a significant period. Lenders typically favour applicants with a steady, predictable income stream, something that locum work, by its very nature, often cannot provide. The trick is, therefore, to get the lender to recognise the mortgage applicant as a locum, and then to provide income evidence over a relevant (typically much shorter) period of time.

Self-employed locums

Being self-employed means you face distinct disadvantages when navigating the mortgage application process. The burden of self-employment means you have to prove income over two to three years. This situation often results in lenders requiring higher deposits or offering less favourable mortgage terms to those who only have a year of trading history, as the perceived risk is much higher compared to applicants with a steady, predictable salary.

Employed locums

Employed locums also face challenges, but not because of the period of time over which to prove income. The issue this time when applying for a mortgage is the nature of their non-permanent contracts. Lenders may be hesitant to approve a loan if the borrower's contract is only for a short period, as they may see it as an unsustainable source of income. In addition, some lenders may require proof of future employment prospects, which can be difficult for employed locums to provide.

Trading Company

A trading limited company is an independent legal entity registered at Companies House.

It operates as a business entity separate from its owners or shareholders. This separation provides liability protection to the owners, meaning their personal assets are not at risk in the event of the company facing financial difficulties.

Trading limited companies play a crucial role in the business world by providing a structured and protected environment for entrepreneurs to conduct their commercial activities while safeguarding their personal assets.

Trading company case studies:

Ensuring Income Stability

Locums’ income can fluctuate widely based on the number of shifts they secure, the seasonal demand for their profession, and other factors. Convincing a mortgage lender of the stability of their income, therefore, becomes a considerable challenge. Cleerly are able to get lenders to use 3 months of income evidence, and this income is then assumed to be sustainable over the year as long as suitable documents are provided to demonstrate stable finances.

Bridging the Gaps Between Assignments

Many locum professionals can experience periods with no work. Some of these periods may be of the locum’s choosing, for holidays or professional development or undertaking new qualifications. These gaps between assignments can be a red flag for lenders though, who might question the applicant's ability to consistently meet mortgage payments. The easiest way to avoid such issues is to ensure the months leading up to a mortgage application do not non-working periods, and if there are such periods then there is suitable proof of study or qualifications. 

Predicting Future Income

The erratic nature of locum work makes predicting future earnings difficult. Lenders often require evidence of sustained or future income, putting locums at a disadvantage during the application process. The only way to manage this concern by lenders is to get them to look backwards rather than forwards. Supplying evidence of previous work via contracts, timesheets, or bank statements can satisfy lenders that work will be plentiful going forward, minimising affordability concerns.

Which locum professions will lenders accept?

Locum work spans a wide array of fields, impacting numerous professionals in their quest for home ownership. Below we highlight some specific examples where certain lenders are willing to offer flexible and bespoke underwriting.

Nice and honest, quite good professionals who will not push you into accepting any deal. It is easy to work with them and they spend a lot of time making sure each step is well understood. I would recommend.
Cleerly client

Spotlight on Locum Professions

Doctors: Locum doctors often fill critical staffing shortages and have the potential for high earnings, yet their varied schedules complicate mortgage applications. Given their earning capacity and the almost endless supply of work for many qualified doctors, locum mortgage criteria are a good fit for this type of professional.

Dentists: Similar to doctors, locum dentists step in to provide essential services across most of the UK, and also face the same financial scrutiny when seeking home loans. The fact that there is again a ready supply of work across the NHS and in the private sector means that lenders have a more positive attitude towards this type of locum.

Optometrists:With demand for eye-care services consistently exceeding the amount of professionals available, locum optometrists are finding work more easily than ever. Given the higher rates of pay for locums versus permanent employment, lenders are now more familiar with, and accepting of, this profession being a common one for locum work.

Nurses: The backbone of healthcare in the UK, locum nurses offer flexibility to the medical field but encounter obstacles in proving long-term financial stability to lenders. Given their earnings are usually far lower than doctors and dentists, affordability assessments will be tighter. The most flexible locum mortgage lenders will treat locum nurses’ income assessments in a similar way to doctors given the steady amount of work that is available.

Pharmacists: Providing crucial services on a temporary basis in a sector that sees huge demand, locum pharmacists must navigate the same financial validation process as other locum professionals. Again, most locum pharmacists can choose to work as much or as little as they want, but the benefit is that many have contracts in place with pharmacy groups or agencies that service the needs of such groups. These contracts can offer much-needed reassurance to lenders who look for structured income proof.

Social Workers: Vital to community support services, locum social workers also grapple with the challenge of securing mortgages due to their contract-based employment. Similar to pharmacists, they will typically have a contract in place, despite having earnings lower than doctors and even some nurses.

A Case of Success: Overcoming the Odds

Sarah's story is a source of hope for locum professionals facing similar challenges.

A locum doctor in London, Sarah experienced initial setbacks in securing a mortgage due to her recent shift to locum work. After other brokers turned her away, Sarah approached Cleerly, who recognised the requirements as a good case for lending for the right lender.

By averaging her income over the last three months from all three practices where she worked, and then annualising these earnings, Cleerly was able to present a strong affordability case to the lender.

Although the lender that was approached did not typically like multiple locum assignments, they saw the strength in Sarah’s case and considered the application.

This approach allowed Sarah to prove her financial stability and affordability, ultimately helping her secure a mortgage to move from a small flat to a house.

Navigating the Process

While the road to securing a mortgage as a locum may seem daunting, success stories like Sarah's prove it's possible with the right strategy and support.