Self-Employed Mortgages: 4 Requirements For An Approved Mortgage Application

Self-Employed Mortgages: 4 Requirements For An Approved Mortgage Application

If you are one of the more than 3 million freelancers, you will already know how difficult it could be to get financing. However, preparing all the necessary documentation and giving the bank a good impression are two tricks that will help you sign the mortgage you are looking for. Here you will find useful information to buy a home.

What are the requirements for a self-employed mortgage?

Before requesting financing to buy a home, it is advisable to check that we comply with the requirements that banks fall in love with. In the case of the self-employed, entities could be somewhat more demanding than with clients who work for others, so it will be even more important for them to review the following aspects:

A stable income ratio.

Banks will see less risk of non-payment in an entrepreneur who achieves a recurring and constant turnover throughout the year than in a freelancer with seasonal income.

The age of the business also matters

That the company works at this time will not be the only requirement that the bank will review, but it will assess its path as well as the solidity of the business and the sector in which it is framed.

A savings of at least 30% of the price of the house.

In general, banks do not finance more than 80%, and purchase and sale expenses are usually around 10% of the price of the house.

The less debt, the better.

The third point that the bank’s risk department will review with a magnifying glass will be what level of indebtedness we have. Therefore, the chances of signing the mortgage will be greater if we have few current loans and their

Businesswoman with house model and keys

installments do not exceed 35% of our income (adding the installment of the future mortgage).

A good credit history

Finally, being up to date with payments to clients, suppliers and lenders, and having a good credit score will be another of the conditions that we must meet if we want to get financing to buy a house.

If we do not meet any of the above conditions, it could be more difficult to find an entity that will approve the mortgage for us. However, as each bank has its own risk policy, it never hurts to explore our possibilities before giving everything up for the loss.

Tip: Applying for the mortgage with another owner who is not self-employed could make things easier for us. In any other case, it will be essential to have a stable income, have sufficient savings and demonstrate the viability of our business.

How to get a mortgage loan if I am self-employed?

Like any other client, if we are self-employed, we must follow the usual steps to apply for a home loan:

  1. Make sure that we meet the requirements to sign a loan.
  2. Compare the financing conditions of various banks.
  3. Get in touch with various entities and negotiate the conditions of the mortgage.
  4. Deliver the required documentation, appraise the home and process the petition.
  5. Review, line by line, the personalized offer that the bank gives us.
  6. Prepare a provision of funds to cover the expenses of the operation.
  7. Go to the signing of the mortgage before a notary.

What documents does a freelancer for a mortgage application?

They say what counts is the first impression. Therefore, a piece of good advice to sign the loan we need would be to go to the bank convinced that we have a good profile and with the documentation ready to tell our story.

Specifically, most banks will ask us for the following information:

  1. An informative dossier about our activity or our company. The entity will appreciate that we present our curriculum and that we summarize what our day-to-day activities at the company consist of. Nor would it be amiss to comment on what relationship we have with our clients, what is the past and recent history of the business and what projects we have in mind for the coming years.
  2. Tax information. The bank will want to check how the company works beyond words, so we will need the last income tax return.
  3. The accounting summary of the company. Although it might not be necessary, we could rescue the latest quarterly models of VAT and personal income tax, as well as the annual summary. The more information, the better.
  4. Updated Working Life. With this document, the entity’s risk department will be able to verify our professional career and the age of our business.
  5. The most recent receipts for the rest of the outstanding loans. Another common check is the payment of debts. The bank will want to know if we are up to date with our financial obligations.

In addition, we could collect the latest movements of our personal checking account and of the company account to demonstrate that our financial solvency would allow us to face the payment of the monthly payments without a problem.