Meta Description – Read about the four major mistakes that self-employed people do. When they apply for a mortgage, knowing about them will help you avoid the threats of rejection.
Already you are in a fragile situation when you apply for a mortgage with the tag of self-employment. It is excellent to be your Boss and pay yourself monthly salaries, but the problem is that the mortgage industry considers the standard salary more seriously.
The people in the job are taken more reliable on the part of repaying capacity. They earn a precise amount every month which does change like the income figures of a business owner with volatile profit-making. However, mortgages for self-employed are readily available, and with attention to several factors, you can get the funds. However, at the same time, you also need to pay equal heed to the mistakes that the self-employed mortgage applicants usually make.
Here are 5 big mistakes that you need to avoid to get the mortgage –
Applying to your own Bank without any second thought
Sometimes applicants think that their bank will quickly provide them with the property loan. They are among the existing clients, and it will be easier to get a mortgage and that too on a friendly rate quote. But you should never forget that terms and conditions apply to every customer. Why take the risk, you may get rejection.
No lender can take abrupt decisions, especially in the case of self-employed applicants. The complications on the part of income assessment always create countless doubts in the mind of the lender. In place of applying to your bank directly, it is better first to apply only one lender that is ready to offer you funds despite your self-employed tag.
Making a big purchase after getting the agreement in principle
The Lender issues an agreement in principle as the initial approval on the mortgage. Some applicants get overconfident, as they think that now when they have attained acceptance on the mortgage request, they can leave their hands loose and can spend money extravagantly. They make big purchases like a car, or maybe a bunch of consumer durables.
You should know that an initial approval on your application is given on the scrutiny of necessary financial information. Before the final disbursement, the lender brings back your finances on the dissection table and then scrutinises every factor with detail. If at that time it finds any significant expense in your record, the rejection may happen.
Your credit card shows a mix of business purpose and your personal pleasure
You know what, you may not realise, but it is considered as a foolish thing to mix business and personal expenses, especially on credit cards. If the use of the business credit cards is for personal reasons like shopping for clothes, spending in an amusement park, going out for a movie etc. etc. it is a blunder. You should get prepared for rejection on the mortgage.
The lenders not only check your repayment capacity but also they want to see how mature you are in money management. If someone cannot keep the necessary discipline of maintaining the business and personal life separate, how can he act dependable on mortgage payments? Mixing business and personal finances is always a bad idea if you want approval on the mortgages for self-employed in the UK.
Change of business structure
It is the biggest mistake that some mortgage seekers do. Usually, the self-employed people working as a sole proprietor transform their business structure into a limited company to sound more durable as a mortgage applicant. Nevertheless, according to the logic, it is nothing but a financial suicide. When you change your business structure, all the financial records or accounts belong to the previous one, and for the new structure, there are no accounts.
That means no proof of income, and it is like applying for a mortgage with zero balance in your bank accounts because now you are a limited company. Until the recent time, you were working as a sole proprietor, and thus it is clear that you earned not as a limited company but as a sole proprietor. This mistake is a clear invitation to rejection.
Do you understand now?
Every step is essential, as it can affect your approval chances on the front of the mortgage. To play smart, you need to avoid big as well as small mistakes. When it comes to the loans with a significant amount, flaws are not allowed. The only thing that is in demand is perfection in the financial behaviour of the applicant.
The time is changing, and now it is not difficult for a self-employed to get a mortgage, but that doesn’t mean that you let the careless attitude disturb the possibilities of obtaining funds. The best tip is staying disciplined in your personal as well as business finances.