Getting a Mortgage When Self Employed in the Covid Era
Getting a mortgage when self-employed has always proved to be a challenge, with lenders requiring extra checks and criteria on prospective borrowers.
During the Covid era, lenders seem to have grown even more stringent on their requirements for the self-employed.
This has meant more reports of disapproval of applications when in reality the products are still available, it’s just the navigation of these often-complex cases that have grown in difficulty.
What are lenders now looking at?
With the economy taking a massive blow during the pandemic, lenders are naturally looking at the bigger picture and taking a more in-depth look into how the situation has impacted applicants’ income and work.
Essentially many applicants are finding themselves having to prove their situation has been unaffected by the current pandemic, which is a big task for many.
For example, lenders are looking at whether businesses or individuals have taken advantage of any of the government support schemes and in what context.
They want to know whether income has remained stable during the pandemic and are requesting evidence in the form of bank statements.
It is apparent that mortgage applications from the self-employed are much more intensive, requiring more time and attention than the typical applicant would experience.
Regardless of the increased intensity and scrutiny, lenders are still offering mortgages to the self-employed, but they are simply being more cautious.
And who can blame them? The additional checks are all part of their due diligence during this turbulent period.
Choosing the right lenders
It is important to be aware that not all lenders are equal in terms of their lending criteria, with HSBC being a notable example of a bank that offers more flexibility when it comes to the self-employed.
Having said that, it is important to assess whether a case has merit before the application is started, as essentially all lenders will have a baseline of what they expect.
However, one notable difference between lenders is the account history they request, some will require just one year, while others will want to see the history for the past three years.
That is why it is fundamental to use a mortgage broker is well versed and up to date with the market, as being able to scout for the best products is essential for success.
Lenders are now typically looking to see if the figures have returned to pre-covid levels and that cash levels are looking healthy.
The biggest concern is probably affordability, with lenders becoming extra cautious and not willing to budge much at all.
Brokers can help
During this turbulent time, lending criteria has changed, and mortgage applications have become much more challenging to not only locate for the self-employed but to process.
An experienced mortgage broker is worth their weight in gold when it comes to streamlining the process, signposting you to the best deals and helping you navigate any stumbling blocks.
A broker is essentially there to help you find a solution so that you can submit an application that will more likely be approved. This could mean they advise you to increase your deposit amount, provide further evidence of accounts and/or apply to a specific lender.