Can I get a mortgage as a contractor?
The short answer is yes but there is more criteria that needs to be met. This is because lenders tend to take a more cautious approach with contractors as your income tends to fluctuate.
What are the lending criteria for contractors?
Generally, you’ll need to have worked in your chosen profession for at least 2 years. You’ll need to have a minimum of 6 months contract history. This is in order to demonstrate that you have experience working as a contractor. You’ll also need to have a minimum of 1 month remaining on your current contract.
The evidence pack required for this involves:
- CV to confirm 2 years experience
- Copy of current contract. If there is less than 1 month remaining, a copy of the new contract needs to be evidenced.
- Recent 3 months bank statements or business bank statements showing income.
- Recent 3 months payslips or invoices
If you are a locum medical professional, supply teacher, construction industry scheme (CIS) worker and contractors on a zero hour contract, you may not need to evidence a minimum of 6 months contractor history nor have a minimum of 1 month remaining on your current contract.
Finally, you can have up to 2 contracts running concurrently equating up a maximum of 40 hours per week.
Can I take out a contractors mortgage with another joint person?
If you are considering to buy a property jointly with someone else that is employed, lenders may look more favourably towards your application as at least one of the applicants has a more predictable income. Both incomes will be taken into account and the standard lending criteria will apply to both applicants.
Can I get a contractor mortgage if I have bad credit?
If you have bad credit, it is still possible to get a contractor mortgage but this does make it more difficult. From a criteria point of view, this puts constraints on you application and reduces the number of lenders out there willing to lend to you. It also depends on when the adverse took place, the amount that you owed and the type of credit commitment the adverse is against. If the adverse was applied a few years ago, under £500 and was related to a utility bill, then this is seen as less serious as a recent adverse against a car loan.
Useful tips to get a mortgage as a contractor
If you are considering to buy a property jointly with someone else that is employed, lenders may look more favourably towards your application as at least one of the applicants has a more predictable income. Both incomes will be taken into account and the standard lending criteria will apply to both applicants.
Here are 3 simple tips for those applying for a mortgage as a contractor:
- Work on your credit score. Look up your credit report and try to find ways to improve it, such as paying your bills on time, getting yourself registered on the electoral roll and making sure you have a credit card that you always pay off on time. I tend to use someone like checkmyfile.com as it shows data from all 3 credit agencies, Experian, Equifax and Transunion.
- Create a steady flow of work. Consistency is key. Take on a steady flow of work and avoid taking breaks in the 12 months before you apply.
- Secure future contracts early. Be proactive and try to secure your contract renewal early. This shows you are planning ahead of time and a responsible contractor.
