Making that commitment to getting your foot on the property ladder is a truly exciting step for anybody to take. Having a place you can call your own home is a great feeling.
Getting to that stage however can be a tricky task for many people. There are many things to consider and hoops to jump through. If you are working as a contractor or freelancer, there are a few additional things that need to be kept in mind.
In the latest Roots Mortgages blog, we pick out 5 things we encourage any contractor or freelancer to consider if they are currently looking or planning to search for a mortgage.
Stay on top of professional admin
One of the historic reasons why contractors and freelancers sometimes struggle in the mortgage space is because lenders require proof of income before committing to their end of the mortgage bargain.
This means that as a contractor or freelancer, the easier you make it for lenders to see the true income you earn, the better place you put yourself in.
Being diligent with things like contracts, financial statements and other relevant factors can be really useful. The last thing you want is to be caught short because you haven’t stayed on top of the administrative details of your work.
As a contractor or freelancer, the financial statements of your private company are a great way of proving income, with the HMRC SA302 particularly beneficial. You can get a printed copy of this by contacting HMRC directly, and it is worth getting copies of the last 2-3 years. This will all help when you sit down with a potential lender.
Additionally, proof of name and address is important for proving who you say you are. So if you’ve not seen your passport for a while, get searching!
Do the maths
This is applicable for all residential mortgage applicants, but we cannot stress enough the need for solid financial planning before committing to a mortgage agreement. While the thrill of owning your own home may be great, getting into financial difficulties down the line certainly isn’t.
As a contractor or freelancer, look to have all bases covered as best you can and play out worst-case scenarios in your head. If you are in a great financial position then go for it, but doubts or concerns should be addressed before committing to a mortgage of any size.
Check your credit score
Any lender will run a mortgage application through a credit check as an elementary step. So if your credit score isn’t great, the lender will know about it sooner rather than later.
This means that your credit score could play a big role in whether you secure that dream home or not.
There are services out there today that can help you address problems or difficulties around credit scores however. So if there is something you can do to make things more appealing for lenders, do it.
Keep an eye on fees
Many people will save up enough funds to start considering putting down a deposit on a home as an initial step towards home ownership. But first-time buyers in particular are often not all that aware of the various other fees that need to be covered when buying a home.
Application fees, booking fees and valuation fees can all add up, while things like early repayment charges are worth knowing about in case they come up down the line.
Other possible fees include a telegraphic transfer fee which covers the cost of your mortgage provider transferring fees to your solicitor, and mortgage account fees, which cover the cost of setting up and maintaining your mortgage account.
Add to this things like Stamp Duty – which may well be back in the game when you are applying – moving costs and other bits and pieces, and the cost of fees can quickly swell.
This all means that the more diligent and prepared you are to cover everything required when moving into your new home, the better.
Don’t go through the process unaided
As a contractor or freelancer, the mortgage field has historically been a bit of a minefield. Though things have got better and lenders are more aware of the specifics of working as a contractor or freelancer, there can still be the occasional hiccup.
This is why we advise working with a specialist contractor mortgage broker or freelancer mortgage broker. This helps ensure you are in the best position to handle these hiccups if they do arise, with a professional team of experts on your side.
With the right guidance and suitable preparation, securing that perfect mortgage and dream home as a contractor or freelancer might not be so very far away.
