Getting a Mortgage When Self-Employed

It's a common misconception that you can't get a mortgage if you're self-employed.

While getting a mortgage when self-employed isn't impossible, mortgage lenders follow slightly different eligibility and lending criteria to determine mortgage application outcomes for freelancers.

Let’s look at what lenders typically need from freelancers, how to get a mortgage when self-employed, and the ways your credit score and credit report come into play.

Can you get a mortgage if you are self-employed?

Yes, you can. It's true that lenders could view self-employed borrowers as higher risk because they don't have the same guaranteed fixed income secured by an employment contract. 

That said, there's no separate mortgage product called a 'self-employed mortgage', but lenders may ask for more evidence to determine that their income is sustainable and that they meet mortgage lending eligibility criteria.

To do that, the Financial Conduct Authority rules require mortgage lenders to obtain independent evidence of declared income and don't allow them to accept a borrower's self-certified income. That's the same for someone with an employment contract, but the evidence requirement is slightly different (more on that later).

The challenge of getting a mortgage as a freelancer is often showing that income is stable, repeatable and sufficiently evidenced, particularly where earnings fluctuate from year to year.

How to get a mortgage when self-employed

First, it's worth knowing how lenders assess your type of self-employment. Calculations differ between sole traders, partnerships, limited company directors and contractors.

If you're a sole trader (which most people consider self-employed), lenders commonly assess net profit. Partnerships usually use the applicant's share of profits. Limited company directors' assessments usually include salary and dividends, but some lenders can consider company profit in certain circumstances.

Note: Lenders look at income over more than one accounting period to establish whether it’s sustainable. Nationwide, NatWest and Santander, for example, generally look at two years and can use the latest year's income where it’s lower than the average.

The next step is to collect your financial evidence. Commonly requested evidence for self-employed workers includes:

• Tax calculations.

• Previous years' accounts, which come from your SA302 forms (usually 2/3 years).

• Tax year overviews (again, usually 2/3 years).

• Bank statements.

• Deposit evidence.

Always check with your mortgage lender specifically what qualifies as sufficient financial evidence before applying.

How many years of accounts do you need for a self-employed mortgage?

There is no universal requirement. Self-employed mortgage applicants are typically asked for two to three years of accounts/tax-return evidence.

Always check the requirements with your mortgage lender and make sure you meet the evidence criteria before applying.

What credit score do you need for a mortgage?

There is no universal minimum credit score required for a UK mortgage, and being self-employed doesn’t affect your credit score. 

Your credit score is a guide to your overall credit health. Lenders assess the information in your credit report alongside their own internal scoring, affordability rules and lending criteria.

A high score doesn't guarantee mortgage approval, just as a lower score doesn’t automatically make getting a mortgage impossible.

More important underlying factors include

• Missed or late payments.

• Defaults, county court judgements, or insolvencies.

• Credit utilisation.

• Recent credit applications and hard searches.

• Electoral Roll information.

• Length and management of credit history.

Understanding your credit report and how some recorded information might impact the success of your mortgage application is more important than simply focusing on your credit score.

At Checkmyfile, we've made it easy for you to check your credit file and see what mortgage lenders see. We’re the only service that puts all your data from the UK’s three main credit reference agencies – Experian, Equifax, and TransUnion – in one place. A lender could check with any of them, and they could each hold different data on you. 

Start with a 7-day free trial and see everything a lender could see. It’s then £14.99 a month. Cancel online anytime. And if you need help, our UK-based customer care team is in your corner.

What documents are needed for a mortgage if you're self-employed?

While mortgage lenders might have different criteria in terms of how many years' accounts you need to provide, the general documentation is the same:

• Proof of identity: usually a passport or driving licence.

• Proof of address: acceptable utility/account documentation where required.

• Personal bank statements: commonly covering around three to six months.

• SA302 tax calculations: showing the income declared to HMRC.

• Matching Tax Year Overviews from HMRC: HMRC says SA302 evidence can currently be obtained for the previous four years.

• Finalised business accounts: often covering the past two years.

• Proof of the deposit: savings statements or evidence explaining a gifted deposit.

Contractors may be asked for contracts or evidence of continuing work, depending on how their income is assessed.

Make sure names, addresses, income figures and accounting periods are consistent across the mortgage application, HMRC records and supporting documents.

Tips to improve the chances of your mortgage application being approved

If you're worried about being self-employed and getting a mortgage, here are a few tips that can help improve your chances of a successful application.

Keep business accounts up to date

Make sure accounts and tax returns are finalised and current before applying, rather than relying on draft figures, and file your Self Assessment information early enough to access the necessary SA302 and Tax Year Overview.

Get on the Electoral Roll

Electoral Roll – also known as the Electoral Register – information helps lenders and credit reference agencies verify your details. You can get on the Electoral Roll through the GOV.UK website. If you've moved house, make sure to re-register using your current address.

Reduce existing debt before you apply

The Financial Conduct Authority guidance specifically includes credit cards, secured and unsecured loans and hire-purchase agreements as committed expenditure when applying for a mortgage.

Avoiding taking out unnecessary new loans, cards or finance shortly before or during a mortgage application could also improve your chances of a successful application.

Save for a larger deposit

A larger deposit means a lower loan-to-value (LTV) mortgage. If a mortgage lender is giving you less money – and taking into account everything we've said so far – they could view you as a lower risk and offer more attractive mortgage deals and rates.

This can be particularly useful for self-employed borrowers because lenders' self-employed criteria and maximum LTVs can differ.

Note: If you can't afford a larger deposit, it’s possible to get a mortgage with a 5% deposit, although product availability and eligibility vary.

Check your credit report

Check your credit report before applying, during, and even after applying to check for anything that might disrupt your mortgage application, and always correct genuine errors before submitting the mortgage application where possible.

Checking your own credit report at Checkmyfile doesn't lower your credit score, and you can update it daily.

Getting a mortgage when self-employed might involve extra documentation, but if your income is sufficient, you have a good credit history, and you are monitoring your credit utilisation, it’s possible to get one.

Prepare for your self-employed mortgage application with Checkmyfile

At Checkmyfile, we put all your data from the three main UK credit reference agencies, Experian, Equifax and TransUnion, into one report. Help improve your chances of mortgage approval by seeing what lenders see before you apply.

Start with a 7-day free trial, then it’s £14.99 a month. Cancel online anytime.