But that does not mean you cannot get a mortgage. An increasing number of contractors have found that getting a mortgage is easier than they thought with the right advice. You can also get a mortgage if you provide proof of your income and take steps to improve your credit score. This article discusses how to get contractor mortgages and reviews the criteria for lenders to lend to them. There are also ways to increase the contractors’ chances of getting a mortgage.
Is It Difficult To Get A Mortgage If You Are A Contractor?
It is a common misconception that it is always more difficult for contractors to get a mortgage than for ordinary salaried workers. In many cases, the evaluation criteria for contractors and salaried workers are the same. They must have a good credit history, sufficient cash assets and a stable employment record. However, newbies contractors or contractors with lower credit scores may face greater challenges in getting a mortgage.
Another problem for contractors is that some do not reflect their actual income in their accounts, making it difficult for them to get mortgage documents because lenders scrutinize contractors’ income and other financial conditions very closely. The coronavirus epidemic stagnation has also made conditions more difficult for contractors.
On the other hand, since contractors have non-traditional income structures, may be required to provide additional income documents when applying for a mortgage. Lenders’ criteria can also vary depending on the lender or lender, making it more difficult for contractors to get a mortgage.
Therefore, getting a mortgage is often more difficult for contractors than salaried workers. But with the advice of a contractor mortgages specialist and taking the necessary steps to prove their income and improve their credit score, their chances of getting a mortgage will increase.
What Are The Documents Required To Receive Contractor Mortgages?
Different lenders ask for different documents depending on the type of application and the nature of the contractors’ work, but these documents will not be the same. Some of the lenders required documents are:
- Identification documents and proof of address
- A copy of your last contract confirming your contract rate.
- A copy of your most recent resume showing your recent work history.
- Two years tax return
- Recent bank statements
- Profit and Loss Statement
- A copy of the business license
- Letter of confirmation of business activity records
- Score and history of credit
- Documents of other income streams, such as rental income, pension payments and Social Security income
How to Increase Your Chances of Getting a Mortgage?
Contractors can take steps to increase their chances of getting the mortgages they are looking for. However, these measures will vary depending on the type of application and their affordability. But in general, the following steps can help them get mortgages at better rates and conditions or make the mortgage process easier.
1. Improving your credit score and track record
By improving your score and credit history, you can increase your chances of getting contractor mortgages. This requires timely payment of bills, paying debts, eliminating negative points in credit reports, and observance of withdrawal limits from credit accounts.
2. Decrease Debt to Income Ratio (DTI)
Another way to increase your chances of getting a mortgage is to lower your debt to income ratio (DTI). Avoiding new debts, reducing current debts and paying them off will reduce the ratio. Making extra money can also reduce this ratio. So contractors can look for other ways to make money.
3. More deposits
Increasing savings and paying more deposits can also increase contractors’ chances of getting a mortgage. In particular, deposit terms for contractor mortgages have become more restrictive since the outbreak of Covid-19, and many lenders have increased the percentage of deposits required for contractor mortgages. Also, the larger your deposit, the cheaper the lender will offer you.
4. Mortgage Search and Evaluation
Searching for different mortgage products and evaluating the lenders’ products can also bring the best opportunities. Some contractor-friendly lenders consider easier criteria for assessing contractors’ affordability.
- Each lender offers different terms and rates, and each of these factors can significantly affect your chance to get a mortgage.
- You should also research different types of mortgages for contractors to understand your options. Types of mortgages include fixed, variable, tracker, interest-only, etc.
- You should also think about your “mortgage term”. The longer this period is, the less your monthly payments will be, but the higher the total interest you will pay. So finding products and lenders in the market can greatly increase your chances of getting a mortgage.
5. Professional contract management
Professional contract management is also very important for contractors.
- When making a contactor mortgages application, make sure you have a copy of your last contract.
- Proving your income and the duration of your contract is very important for lenders.
- You should also avoid long gaps between contracts as this is a negative point to prove the stability of your income.
- If the contractors do not renew their contract, it is still possible for them to get a mortgage, but the number of available lenders will probably be less.
6. Using a Professional Mortgage Advisor
Using a professional contractor mortgages advisor can also increase your chances. Utilizing the advice of a contractor mortgages expert who knows the history and documents of the contracting business can help you present your business income and debts clearly and understandably. Thus mortgage process for you will be easier. In addition, some lenders offer their products through selected brokers.
What Are The Benefits Of Using SWG Mortgage Contractor Mortgages Specialists?
SWG Mortgage advisors will help you in several ways to get your contractor mortgages based on the rate, terms and period of your interest.
- They have accurate information on the contractors’ market and can therefore interpret contractors’ income for lenders.
- Have access to rates as well as other lenders information.
- They understand your specific needs and income (limited company, Umbrella Company, sole trader, self-employment)
- Know how to negotiate with lenders.
- They search the market for mortgage products to find the most reasonable rates and conditions.
- They are entirely independent and have direct access to real lenders and their underwriting teams.
- Help you gather the lenders needed documents.
- They will be with you from the beginning to the end of the process and provide you with the necessary guidance in the various stages of getting a mortgage.
- They make the right timing based on their experience and help you understand the available options and the best time to apply.
Each lender has its criteria, so it will be difficult to know which one they are willing to lend to. SWG Mortgage advisors will help you not to worry about the mortgage process. Contact our advisors to save you time and energy and get the most suitable mortgage with the desired rates and conditions.