Getting A Mortgage If You’re Self-Employed With Bad Credit
Everything you need to know about how to get a mortgage if you are self-employed and have adverse credit
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In this article we’ll explain how to get a bad credit mortgage when you’re self-employed, what criteria you’ll need to meet and why using the services of a specialist broker can make all the difference.
Can you get a bad credit mortgage if you’re self-employed?
Yes! There are mortgages available for self-employed people who have bad credit, but seeking expert advice before you apply is highly recommended. It could well be the case that you need a specialist mortgage lender with an appetite for risk.
The level of risk involved in the deal will come down to a number of factors, such as…
- How long you’ve been self-employed for
- The cause of the bad credit and how long ago it occurred
- The circumstances surrounding your adverse credit
- How much deposit you have
- How closely you meet the lender’s affordability criteria
Getting the most favourable interest rates possible is a case of matching the level of risk to the lender with the right appetite for it, and the brokers we work with will know the mortgage provider who is best positioned to help you
How to get a mortgage if you’re self-employed with bad credit
Your first step should be to seek professional advice from a specialist bad credit mortgage broker. Using our free broker-matching service you can speak straight away to the right mortgage broker by simply making an enquiry online.
They’ll be able to help with:
- Checking your credit reports: You’ll want your file to be in the best possible shape, so downloading your credit reports will give you the chance to challenge any inaccuracies.
- Finding the right lender: If you do have bad credit, you’ll need a specialist lender and your broker will know which ones to approach
- Gather all the necessary documents: Your broker will know exactly what documentary evidence a lender will expect to see and will help you throughout the mortgage application process
One of the main benefits of applying through a broker is that they can introduce you to the right lender – in this case, one who specialises in self-employed professionals with bad credit – first time, and this could potentially save you time, money and marks on your credit file.
Why going direct to a lender is not recommended in this situation
Approaching lenders directly comes with the risk of being declined for a mortgage simply because that particular lender’s eligibility criteria didn’t cater for the specific credit issue you’ve had. The end result of this would be further marks on your credit report.
This could jeopardise any future applications for finance as mortgage lenders are wary of too many borrowing requests in a short space of time. Plus, most of the lenders who consider adverse credit are only accessible via a broker anyway. This is why approaching a specialist broker first is the smart move.
Did you know… You could access 30% more of the mortgage market with a specialist Bad-Credit broker on your side.
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What criteria will you need to meet?
As a self-employed individual, the criteria you need to meet is mainly the same apart from the way your income is assessed.
Most lenders will want you to produce two-to-three years of accounts or tax calculations, although it may be possible to find a provider who is happy with 12 months, depending on how much additional risk your adverse credit carries..
It will likely help your cause if your accounts show steady income during the period they cover, as fluctuating earnings could raise concerns with the lender. If your income has gaps, a strong track record in the industry you trade in can help offset some of the risks.
How will your bad credit be assessed?
While some mortgage lenders might reject your application or offer hike-up rates if you have bad credit, specialist mortgage providers are known to take a broader, more flexible view of applications.
The lenders will base their lending decision on the following…
The type of bad credit you have:
Some credit issues are more severe than others. For example, bankruptcy is considered the most serious and a missed mobile phone bill payment is generally easy for mortgage lenders to overlook.
Below you’ll find a list of credit issues ranked based on their severity – the ones at the top are the least severe.
- No credit history
- Low credit ratings
- Late payments
- Unauthorised overdraft charges
- Mortgage arrears
- County Court Judgement (CCJ)
- Debt Management Plan (DMP)
- Individual Voluntary Arrangement (IVA)
- Multiple credit issues
The age of the credit issue
The most severe types of bad credit, such as bankruptcy, will need to be discharged, but all such issues will disappear from your credit report after six years. After this point, the number of lenders you have to choose from and the rates you will be offered will steadily improve.
The reason for the credit issue
An unexpected life event is easier for lenders to overlook than gross financial mismanagement, especially if your financial conduct has been responsible since the issue was registered.
Lenders who offer bad credit mortgages may be willing to take the above factors on board as well as how closely you meet the rest of their eligibility and affordability criteria. There are also ways that you can offset the risk posed by your bad credit history
How to lower the risk
You can lower the level of risk to increase the number of approachable lenders.
- Put down extra deposit: Most mortgage lenders prefer customers to have at least 10-15% deposit (although 5% deals are available) but if you have bad credit, putting down extra is usually recommended as it could give you access to better rates.
- Declare at least three years of accounts: The more accounts you have to prove your income, the better. Having at least three years’ worth will likely give you access to a wider range of deals due to the increased number of lenders you could approach.
- Pay off any debts you’re in a position to clear: Not only will settling them on time boost your credit rating, clearing any debts could allow you to borrow more by improving your debt-to-income ratio.
- Apply through a mortgage broker: Applying for your mortgage through a broker can also help you land a more favourable deal as they will be able to suggest other ways to lower the risk and help you find the best lender for your circumstances.
How much will you be able to borrow?
The answer to this will depend on how you trade. Select your trading type from the drop-down menu on our calculator below to get a rough idea of your maximum borrowing, but keep in mind that bad credit might prevent you from accessing the highest income multiples.
Self-Employed Mortgage Calculator
This calculator can work out your maximum mortgage borrowing if you're self-employed. Select your trading style from the drop-down menu, then enter your income and outgoings, and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your net profit or the total income declared. To borrow more than this, you will need to speak to a mortgage broker who specialises in self-employed borrowers
This is based on 4.5 times your share of the partnership's net profit or total income declared. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers
This is based on 4.5 times your share of the net profit/salary plus dividends, or total income declared. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers.
This is based on 4.5 times your income. To borrow more than this, you will need to speak to a broker who specialises in self-employed borrowers.
Some lenders would consider letting you borrow
This is based on 5 times your net profit or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your share of the partnership's net profit or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your share of the net profit/salary plus dividends, or your total income recieved. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
This is based on 5 times your income. This income multiple is often unavailable to borrowers who aren't applying through a mortgage broker.
A minority of lenders would consider letting you borrow
This is based on 6 times your net profit or the total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your shares of the net profit or total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your share of the net profit/salary plus dividends, or total income declared. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
This is based on 6 times your income. This income multiple is only available under specific circumstances and is usually only accessible via a broker.
Now that you have a rough idea of your maximum borrowing, get in touch to speak to a mortgage broker who can provide bespoke calculations and access to the best rates and deals.
Will it make a difference if it’s a joint mortgage?
Yes. The income multiple you qualify for will be based on the combined earnings of everyone who will be named on the mortgage.
One thing to keep in mind, though, is that your bad credit will be factored in when the lender is assessing the overall strength of the application. It’s possible to get a joint mortgage when one applicant has credit issues, but a specialist adverse credit lender would usually be needed to make sure you’re getting the best deal.
Speak to a bad credit and self-employed mortgage specialist
If you’ve had – or have – a bad credit record and are self-employed, you can still get a mortgage. But, it can be much more difficult trying to do this on your own. The smart move is to use the services of a specialist broker who has lots of experience with self-employed applicants who’ve experienced credit issues in the past.
We offer a free, broker-matching service. This means we’ll quickly assess your credit situation and then pair you up with an expert advisor that best fits your needs.
Just call 0808 189 2301 or make an enquiry. We’ll arrange a free, no-obligation introductory call between you and your ideal bad credit mortgage broker today.
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