Collaborative Post
Being a freelance or contract worker comes with all kinds of challenges, but one of the most challenging to overcome has historically been getting a mortgage. Banks and other lenders can be wary of agreeing to mortgages to someone not in traditional employment without a regular pay schedule. Luckily, it is getting easier as more people opt for contract work. Here’s how to get a mortgage as a contractor.
Get Your Paperwork In Order
Whether you’re applying for a standard mortgage or a specialist contractor mortgage, you will need to have all your contract paperwork up to date and in good order. Any lender will want to see your contract rate and duration as evidence of your income and your long-term prospects before agreeing to lend you any money.
Avoid Long Breaks
As well as a sustainable level of income, a lender will be looking for consistency. For between 12 and 24 months before applying for a mortgage, try not to have any breaks of more than a few weeks between contracts. Longer gaps are worrying to a lender, as they must question your ability to meet the monthly repayments.
The best chance of getting a favourable mortgage rate is to save a healthy deposit of at least 10%. If you can save up to 25%, even better. Manage your finances to help you save for a deposit and have an easier time getting your dream home.
Don’t Overstretch Your Budget
The amount of money that a lender is willing to offer you may actually end up with higher repayments than you can actually comfortably afford. Do the calculations first so you know how much you can afford to pay back each month. When applying for your mortgage, be realistic about your budget and don’t accept an offer that would be a struggle to manage. Remember that interest rates can fluctuate when making this decision.
Know Your Credit Rating
If you know your credit rating, you can prepare for any potential hurdles it might cause. No matter how high your income or how high a deposit you have saved up, a lender will be reluctant to lend to you if your credit score is poor as they will see you as high risk. Check your credit rating online. Correct any errors and then take a look at anything dragging your score down and start working to improve it.
Call In The Experts
One of the reasons it can be harder to get a mortgage if you are a contract or freelance worker is a lack of understanding from traditional lenders. Banks and other high street lenders often don’t know much about your kind of work, and what they don’t understand, they won’t trust. Find a specialist mortgage broker who is used to dealing with freelancers and contractors. There are mortgage brokers like Quantum Finance out there that work with so many different types of people, and have seen every single type of situation out there that they can guide you. They will understand what you do and be better able to negotiate fairer and more favourable terms for you from a mortgage lender and get you on your way to property ownership.