Recent research has shown that more than one in five contractors and self-employed believe that it is more difficult to get a mortgage because they are not full-time employment. However, almost a third claim that lenders make them risky customers.
Statistics also show that 16% of those self-employed for one to ten years prefer to get a mortgage through a broker who can help guide them. But lenders and underwriters want to see three things from one mortgage applicant.
- Credit – The higher the credit rating of the contractors, the better
- Capacity – Do contractors have income conditions to repay the mortgage?
- Secure – An advance payment that meets the mortgage requirements of the contractors.
The Main Obstacles To Self-Employed When Applying For Contractor Mortgages
In general, the main barriers that most self-employed face when applying for contractor mortgages are:
- Proof of income – Self-employed used to tell lenders how much they earned without providing any evidence. But lenders now need proof of income for all applications.
- Irregular income – Most self-employed earn a different amount each month, but lenders usually want to see a steady income that does not fluctuate over time.
- Short-term contracts – Some employment contracts may only last a few weeks or months. This worries lenders about the non-payment of self-employed mortgages instalments.
Despite these challenges, most lenders are willing to lend to the self-employed and contractors and have adapted some of their lending criteria to address this group better.
Self-Employed Strategies For Accepting Contractor Mortgages
There are several solutions in this regard, including:
- More accounting years – The more accounting years the self-employed have a fixed or rising income, the better their chances of getting contractor mortgages. Lenders usually want to see accounts for at least 2 years. The lender is looking to see if the self-employed can prove a steady income from the same job for at least 2 years. This could mean that the applicant has their own company or customer (s) paid continuously during that time.
- Proof of future income – It will help if they can prove that they have much work to do in the future or will work as contractors in an industry where they used to work full time.
- Pay more deposits – Having a substantial deposit can also be a real benefit for home buyers or contractors, reducing the risk for lenders.
- Self-employed mortgages specialist – Often, a broker who has experience finding self-employed mortgages can advise which lenders are more interested in self-employed applications, which can help speed things up.
DTI amount of contractors
- Increase in credit score – Debt to Income Ratio (DTI) is the amount of contractors’ debt to income. The minimum monthly payments of total debt divided by the gross monthly income of contractors are indicative of DTI and should take steps to reduce it to 50% or less. Self-employed should consider the factors that can increase their credit score. A credit score is a number that tells lenders how reliable self-employed is when repaying a mortgage or other debt. The lower the ratio, the better the chances of self-employed getting contractor mortgages – and at a lower interest rate.
- Be honest – Applicants are asked about their job and income. Whether by filling out a form or talking on the phone. There is no point in telling the truth or avoiding the question. You have to be honest about being self-employed because you probably have to prove what the applicants are saying with a bank statement or a tax return. Self-employed may also need to go through pre-qualification or pre-certification processes – pre-qualification provides more detailed reviews of income and other assets, and pre-certification requires a more in-depth review of income and other documents.
- Preparing, collecting, and updating documents – Self-employed should gather the appropriate documents to make the application process more manageable and show their contractor mortgage officer that they are ready to begin the process.
- Finding the best lender – Many lenders rely on the traditional lending process to home buyers – asking applicants for documents and numbers that they may not have self-employed. But many lenders can offer other ways to get a contractor mortgage.
The Importance Of Using The Services Of AWS Mortgages Advisors
AWS Mortgages advisors liaise with many lenders to help contractors clarify some contractor mortgages’ rates and repayment terms. Our specialist advisors will compare the rates for you and explain the terms of each contractor mortgage to you.
Also, our specialist advisors can get special rates from lenders due to the size of the business. Which is less than what you can get alone. In some cases, our advisors can ask lenders to waive some or all of these costs. Which can save you hundreds to thousands of dollars.
AWS Mortgages advisors will compare the rates and mortgage terms of many lenders for you. It would take much time for you to reach out to every lender.
AWS Mortgages advisors also compare the various products available in the market based on the needs and conditions of customers. And provide the necessary guidance to applicants in choosing the best option. As lending criteria become more complicated, finding suitable mortgages for contractors has become more complex, and our expert advisers, who have enough experience in this field, help borrowers choose the correct option.
Our specialists themselves inform the jobs with the challenges and obstacles facing them and offer them. Their suggested solutions to increase their chances of getting a contractor mortgage.