Last Updated on 24 April, 2024 by Abrahamtolle
Getting a mortgage can be challenging for self-employed individuals, such as freelancers or traders. Even though the self-employed market is increasing gradually every year, banks and financial institutions do not keep up with the dynamic of the workforce today. So, if you are a self-employed trader and want to get a mortgage, you’d wonder if you’re eligible or not.
So, can You Get a Mortgage As a Trader?
Yes, you can get a mortgage if you are a trader, but only under certain conditions. The lender will look at how large and consistent your income has been, in order to decide if it’s likely that you will be able to repay the loan. Generally, it’s good to have at least 12 months of profitable trading history, but some banks will require even more.
Before continuing, we’d just like to make sure that all readers are aware that the difficulty of getting a mortgage varies with economic policies and conditions. The information in this article is not advice, but just general information on how banks may resonate.
What are the Main Conditions You Should Check to Qualify for a Mortgage?
Generally, there are a few main conditions you should know when you apply for such an important loan. First of all, you might have to be clear of other loans or debts you may have. Another important thing is the credit history you have. If you always paid your debts in time and accumulated good points from the banks, you will definitely increase your chances of qualifying for a mortgage.
It may be more challenging to get a mortgage when you are a trader, considering that you are self-employed and that you do not have a steady income. That is something very important for financial institutions. However, you increase your chances of securing a mortgage if you check on these most important conditions:
- Have been a trader for at least one year
- Have a good credit score
- Prove with documents that your income is steady and can cover a monthly fee you will pay for the mortgage
- Make sure you don’t have any other loans running
- Get good references from the people you have worked with; this may help the lender build confidence in you and your ability to pay your debts in time
What Documents Will You Need?
As a trader in this situation, you need to be prepared to bring multiple documents with you to the lender. The lender will want to look at your trading history, so you need to prove you are eligible. Therefore, you have to prepare the latest tax returns. Some lenders accept financial documents you have filled in by yourself, but there are some that request your accounts to be filled by an accountant.
Also, lenders will look at your net profit amount to see if you are eligible for a mortgage. There may be an issue here considering that a self-employed trader will aim to declare as little as legally possible, to reduce the annual tax bill. If you believe that may be your case, you could find lenders that will look at your gross income to assess your eligibility for a loan.
Sometimes the lender might also want to have a look at how much capital you have outside of your trading business. If you have a significant sum of money on the bank or in low-risk investments, that decreases the risk for the lender.
In addition to all these, you will probably also need standard documents such as photo ID, proof of address and bank statements. It’s important to be able to make proof of your address and present these documents in a timely manner. Also, pay attention to the bank statement – it may be a problem if you have high outgoings compared to the income.
Other Things to Consider
When applying for a mortgage as a self-employed trader, you must consider the fact that the lender will double-check you and analyze your file a little more; they just need to make sure you can repay the loan. If you want to get a mortgage easy, make sure you pay attention to your trading history, deposits you may have, income and how much you have spent in the last months, and also what type of lender you choose.
However, if all these aspects are going in your favor, you stand a chance of getting a mortgage soon without being affected by the fact that you don’t have a day-to-day job. Pay special attention to the rates offered by the lender – the lenders may offer you higher rates due to several factors such as bad credit history, low income or no account history.
In the end, if you have all your documents in order and go by the law in your trading activity, there should be no problem in getting a mortgage at a good rate. Stay optimistic and confident and be prepared to prove you are serious about the loan you need.
Good luck!
FAQ
What documents are required when applying for a mortgage as a trader?
As a trader, you may need to provide your latest tax returns, trading history, and net profit details. Some lenders may accept self-filled financial documents, while others might require an accountant’s input. Standard documents like photo ID, proof of address, and bank statements are also necessary.
What other standard documents are required for a mortgage application?
In addition to financial documents, standard requirements include photo ID, proof of address, and bank statements. Timely presentation of these documents is crucial, and attention to the bank statement is necessary to avoid issues with high outgoings compared to income.
How can a self-employed trader increase the chances of getting a mortgage at a good rate?
Having well-organized and law-abiding trading activity, along with proper documentation, is key. Paying attention to rates offered by lenders and maintaining a positive financial profile can help secure a mortgage at a favorable rate.
If you enjoyed this article you might also like our other articles answering common questions traders have!