There are now financial institutions and companies that specialize in mortgages for home-workers, the self-employed and the contracting sector if you know where to look.
A lot of contractors and self - employed workers often see the excitement of working on their own and finally starting their own business somewhat ruined when they find out that it will now be much harder for them to secure a home loan. The reason for this is that their new style of working has never sat well with the loan companies, namely the banks, building societies and other financial institutions.
These institutions have always seen the self-employed and those working within the contracting sector as being more susceptible to a drop in income and offering an unpredictable income stream in comparison with regular salaried workers - and therefore as a possible repayment risk. Naturally self-employed workers have always found this to be unfair and frustrating because they tend to actually earn a great deal more than their regular salaried counterparts but are simply being penalized because of older prejudices.
Yet these days things are getting better for home workers and self-employed workers because the old loan companies and banks are having to compete with a new breed of loan broker who have opened up the markets to a wider class of borrower.
Indeed now there are financial institutions and companies that specialize in packages for home-workers, the self-employed and the contracting sector, from contractor pensions, contractor loans, contractor tax structures and umbrella companies to contractor mortgages. These institutions will weigh up the self-employed worker or contractor’s work history, rates of pay, company history and calculated annualized income and then decide based on these newer, more complete criteria rather than the old black and white system. They normally offer loans that aren’t attached to the old self certification mortgages which came packaged with higher charges and punitive rates. Rather, they help self-employed workers borrow on an adjusted and annualized calculation of their contracting income, using only a minimum deposit.
How do you ensure you qualify? First, gather as much supporting documentation as you can, from previous tax records to old pay slips to 1099 forms as well as details of future contracts and also your bank statements. Second, ensure you’ve saved a sizeable sum for the deposit. Then save a bit more. Show them you’re investing a significant sum of your own hard-earned cash. Lastly, if necessary, don’t be afraid to get part time work in addition to your self-employment, simply to show the bank that you have a fixed income coming in.
With just a bit of persistence and some careful research self-employed workers can finally get that home loan.
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