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Contractors are Finding it Easier to get a Mortgage

A new study has found that contractors and the self employed community at large are now starting to get accepted for mortgages a bit easier than in the past.

It was only a few years ago that being a contractor meant you got declined before you even applied, but now things are definitely changing for the better, and so they should, as millions of people in the UK are classified as self employed with many of them being contractors.

The mortgage companies simply cannot ignore this, and that is why they are changing their attitudes to how they treat potential customers who are self employed.

However, although it is “easier” than before to get a mortgage, that doesn’t mean it is easy. As thousands of contractors are finding out each month, there is still a lot of paperwork to be submitted and quite a number of hoops to jump through if they want to be successful in their application.

A lot of these stricter measures are not necessarily only for the self employed, as they have tightened up their lending across the board after the financial crisis of a few years ago. In other words, they want to put an end to reckless borrowing, which all in all is a good thing.

Typically, a contractor will be asked to show around 3 years worth of earnings, as well as giving the lenders access to other documents such as accounts and tax returns.

It might seem a bit too much at times, but you have to remember they are about to lend you a significant amount of money to buy a house, which means they have to be 100% certain about your eligibility.

Obviously, the main problem a lot of self employed contractors run into is the fact their earnings may be unpredictable at the best of times, with some months being slow and other months having more work than they know what to do with.

Luckily, many lenders will work out the average income, and as long as this average stacks up over the 3 years of earnings then you have a good chance of being accepted.

I am often asked about what steps contractors should be taking in order to ensure they have the best chance possible of getting a mortgage on favourable terms. My number one piece of advice? Make sure you hire a certified or chartered accountant to do your books, as this makes everything look more professional and it gives you credibility with the lenders.

Also, make sure you save up a large enough deposit to show that you are serious about getting a mortgage and not just expecting the lender to come up with all the cash. Do these things and you really do have the best chance possible of being accepted with very low interest rates.

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