Getting a mortgage when you’re self-employed can feel harder than for someone with a regular job. One common question is, “How long do I need to be self-employed to get a mortgage?” In this guide, we’ll explain how long you need to be self-employed, what documents lenders need, and tips to increase your chances of getting approved.

When are you considered self-employed?

You are considered self-employed if you run your own business, are a freelancer, or work for yourself. This includes being a sole trader, part of a partnership, or a director of your own limited company. As a self-employed person, lenders will want to know your financial situation to see if you can afford to pay back the mortgage. This means you will need to show proof of income and financial history.

Why do lenders need salary history?

Lenders want to be sure you can reliably pay back your mortgage. If you have a regular job, your income stays the same each month. But as a self-employed person, your income can change from month to month, making it harder for lenders to assess how risky it is to lend to you. Because of this, lenders usually ask for at least two years of income history to get a better idea of your financial stability.

Can you get a mortgage with less than two years of accounts?

Most lenders want to see at least two years of accounts, but some might accept less if you show them other strong evidence of your ability to pay the mortgage. For example, if you have a great credit score, a solid track record in your industry, or contracts that prove you’ll have a steady income, it may be easier to get approved. If you’re new to self-employment, working with a mortgage broker can help you find lenders who are more flexible with shorter self-employment histories. You may be able to get a mortgage even if you’ve been trading for just a year.

What documents do lenders need from self-employed applicants?

When you apply for a mortgage, lenders will ask for documents to prove your income and show you can afford the loan. Typically, you’ll need to provide:

  1. Two years of tax returns – This shows how much you’ve earned in the last two years.
  2. Financial statements or accounts – Lenders will want to see your business’s financial health over the last two years.
  3. Bank statements – Lenders might ask for recent bank statements (3-6 months) to check if your income is steady.
  4. Additional proof – Some lenders may ask for extra documents like contracts or rental income details.

Make sure your documents are original, complete and up-to-date to make the application process smoother.

How to improve your mortgage approval chances

There are several steps you can take to improve your chances of being approved for a mortgage:

  1. Maintain a good credit score – Lenders look at your credit history, so make sure you’ve paid off debts and avoided missing payments.
  2. Save for a larger deposit – The more you can put down as a deposit, the better. Aim for at least a 20% deposit, but the more, the better.
  3. Organise your documents – Have your financial documents ready to show lenders you’re serious and organised.
  4. Consider a mortgage broker – A broker can help you find lenders who are more likely to work with self-employed people, and they can guide you through the process.

What if you’ve recently become self-employed?

If you’ve just become self-employed, it can be harder to get a mortgage, but it’s not impossible. Some lenders may accept shorter self-employment periods if you have other strong financial factors, like a good credit history or significant savings. A larger deposit and a good credit score can also help.

You may also be able to apply for a mortgage based on your previous work history. If you’ve been in the same industry for years, even if you just recently became self-employed, some lenders may consider this as part of their decision.

How long do you have to be self-employed to get a mortgage?

While two years of self-employment is the standard requirement for most lenders, it’s not always a strict rule. Some lenders will consider you with just one year of self-employment, depending on your overall financial situation. However, the longer you’ve been self-employed, the easier it will be to secure better interest rates and mortgage terms.

How to find the best mortgage deals for the self-employed

To find the best deal, you need to compare different self-employed mortgage lenders. Here are some tips to help:

  1. Compare interest rates and terms – Different lenders have different criteria for self-employed applicants. Compare interest rates, fees, and loan terms to find the best deal.
  2. Work with a mortgage broker – A broker can help you find the right mortgage, especially if you’re self-employed. They know which lenders are more likely to approve self-employed applicants and can help you navigate the process.
  3. Get your documents in order – Make sure your tax returns, bank statements, and other paperwork are ready and accurate.
  4. Consider your loan-to-value ratio – The larger your deposit, the better your mortgage deal will likely be. Aim for at least a 20% deposit to secure the best rates.

Conclusion

Getting a mortgage when you’re self-employed may be a little more complicated, but it’s certainly possible. By providing accurate documentation, maintaining a good credit score, and considering working with a mortgage broker, you can improve your chances of getting approved. If you’re ready to apply for a mortgage, learn more about self-employed mortgages or speak to a mortgage broker to guide you through the process.