As a first time buyer, you want nothing more than to get the keys to your property so you can start your new chapter. But there are a few things you’ll need to do to reach your end goal – including putting forward a strong mortgage application to the right lender.
This can be tricky if you’re working as a contractor, because you’re not guaranteed the same level of income as a full-time employee, and your working situation can be a little more unpredictable. Many mortgage lenders have a checklist you need to match as their typical lending criteria, usually defined by an annual income. As a contractor, you know that those figures aren't as easy to produce with so many fluctuations in your working regime. Without the standard payslip as proof of income, the specialist lender that provides contractor mortgages will look deeper into alternative ways to find the figures that prove you're low risk, showing you can meet your monthly mortgage repayments. Although it may be a little more difficult to get a mortgage as a freelance or self-employed professional, it’s certainly possible.
Here’s more information on the challenges you might encounter, plus plenty of good reasons why you need one of our experienced mortgage brokers by your side throughout the process.
Things to consider as a first-time buyer
Lenders define a first-time buyer as someone purchasing a property who has never owned a home previously.
If you’re a first-time buyer, you might not fully understand the mortgage process, so it can be really helpful to speak to an expert to talk you through it. He or she will explain all the key terminology and help you work out how much your monthly repayments will be, as well as how much the mortgage will cost you over the course of your full term.
One key thing to ensure from the start is that you have all the right documents to hand. Any errors, inconsistencies or omissions from your paperwork could be a red flag to your lender and could put you in a poor position when it comes to being accepted for a mortgage.
As a first time buyer, you might not have a strong credit history. Chances are you’ve never had to pay back this kind of debt before. From the lender’s perspective, taking you on as a mortgage customer is a bit of a gamble because they have no examples of your reliability as a debtor. This is why it’s so important to use a mortgage broker when looking to apply for a first-time buyer mortgage. Their expertise will help you meet lender criteria, which in turn will give you a better chance of being accepted for a mortgage and securing your dream home.
How might being a contractor affect your chances of getting a mortgage?
If you’re a contractor and you want to qualify for a mortgage, you may find that lenders will ask you for around three years of accounts. This can cause big issues if you haven’t been contracting for this amount of time, or if you draw out your income via company dividends, as this will make your net income average look low.
Lenders can sometimes be hesitant to offer credit to contractors. Many companies believe that a contractor’s employment status is not completely secure, and steady income is not guaranteed. And while your earnings aren’t factored into your credit score, your debt-to-ratio income will have a huge bearing on your rating, so your overall financial health needs to be taken into consideration, too.
While the mortgage landscape has changed a lot over recent years, many High Street lenders are still not making it easy for contractors to get a mortgage – especially those who have never bought a property before. That said, there are specialists in the market who are more than happy to take a view on your circumstances and provide solutions, not barriers.
At CLS Money, we work with a range of brokers who are dedicated to helping contractors like you find the right mortgage for their circumstances. Depending on how well you meet our specialist lenders’ eligibility criteria, we may even be able to source a deal that is just as competitively priced as an agreement that’s available to permanent employees.
Using a mortgage broker?
As you can see, you’re likely to face a few hurdles as a contractor looking to buy your first home. However, getting the best advice from the very beginning of your property journey will give you a better chance of securing the right mortgage agreement from a lender who can offer you attractive rates.
Speak to our team today for guidance on the best way forward. All our upfront advice is completely free – and because we work with the whole of the market, we have access to plenty of exclusive deals that are specifically designed for contractors and self-employed individuals who are keen to get on the property ladder.
CLS Money have mortgage deals for every unique situation
You might not need a contractor mortgage or be a first-time buyer at all, but there are so many situations where achieving mortgage approval from the major lenders or high street banks is proving harder than you expected. You could have a fluctuating income, typical with many self-employed borrowers, have a set of business accounts instead of a company payslip or even have a low credit rating preventing you from getting the most appropriate mortgage in your position.
As well as working with contractor-friendly lenders, CLS work with all kinds of specialist mortgage providers ready and waiting to listen to your case. We achieve mortgage deals for all kinds of applicants. We look into your personal details to find the best specialist lender for your situation, hopeful mortgage amount and average annual income.
First-time buyer mortgages are one of our specialities, and our mortgage service is second to none. If you'd like to see just how much simpler our application process can be compared to those of the major lenders, we'd love to hear from you.