Getting a mortgage being self employed

biglad

Just wondered if anyone knew how easy it was to get a mortgage being self employed, i have a part time job aswell and have only been self employed just over 6 months. My OH was going to get the mortgage with me aswell, but have heard its hard to get one being self employed.

is it true mortgage brokers can tell little white lies with regard to a self employed income, this is what ive been told by someone who actually wroks as a manager for a bank, but wana make sure its legit

Thanks

AndrewSmith

biglad wrote:

Just wondered if anyone knew how easy it was to get a mortgage being self employed, i have a part time job aswell and have only been self employed just over 6 months. My OH was going to get the mortgage with me aswell, but have heard its hard to get one being self employed.

is it true mortgage brokers can tell little white lies with regard to a self employed income, this is what ive been told by someone who actually wroks as a manager for a bank, but wana make sure its legit

Thanks

It need not be hard to obtain a mortgage being self employed even with little or no proof of income.

Yes there are some brokers who are prepared to lie on mortgage application forms however that 'little white lie' could cost your broker and you up to 10 years in prison for Mortgage Fraud, as it is deemed as obtaining money by deception and fraud.

There are those who say this is nonsense however I have actually seen it happen to a broker and his client.

As a manager for a bank I think that the person you speak of is acting completely irresponsibly, and I would love to be a fly on the wall in his next 1 to 1 with his manager should it ever come out what he said. What a joker, especially in his position as a manager.

The type ofmortgage to which you are referring is called 'self certify' which is used for newly self employed people or people who have income that they cannot prove via the normal accepted methods.

It does not change the amount you earn or the amount the lenders will give you based on those earnings.

Don't be tempted into the trap of inflating your income to borrow more money.

Post details of your income and the amount of mortgage you need along wioth the property value and I am sure that help and guidance will follow.

Cheers

Andy

herbiesjp

There are so many posts like this on the board, and the simple answer is DO NOT LIE about your income. It is fraud and you can end up in jail.

Any decent self respecting broker will either be able to help you find a deal based on your true circumstances, or they will advise you to wait until you can meet the criteria of some lenders

HTH

biglad

thanks for your input. i did actually think it was too good to be true

jamesd

At six months into self-employment, a time when income is quite often below typical income for the business because it is starting up, it does seem reasonable to be somewhat optimistic in projected income. But how far could such reasonable optimism about the future of the business in its accounts and business plan prudently go for mortgage purpose? It obviously has to be based on realistic business planning but just what is reasonable for mortgage purposes?

biglad, mortgage offers can be very flexible. You might want to take a pessimistic view that your business will not improve and give those figures to ask what mortgages would be available even with that pessimistic projection of income. Add in more reasonable middle case and optimistic projections as well and you should get a fair idea of how your position will change depending on how well the business does. That might cause you to decide that a delay for a little while to improve your demonstrable business position and mortgage offers is worthwhile.

Tassotti

Isn't it more important to work out if you can afford the repayments?

Okay, mortgage fraud is illegal and can, as Andrew says, impose a custodial sentence of up to ten years.

However, this is very unlikely to happen if you make the repayments every month. The lender won't care as long as they get their money.

I would not advise this, but it can be done!!

scoobiesnacks

Being self-employed is a different situation, as the net profit on your accounts looks artificially low compared to a salaried person. I'm self employed, and until self cert came along was always frustrated with the amount I would be loaned. I knew I could afford more and so it has been proved now that I've borrowed more than the traditional multiples and self cert. If you're sure you can afford it, go for it. Just don't miss any repayments.

herbiesjp

Being self employed does not automatically limit you to self certs. You earn the same income eitehr if you go to a "normal" lender or a self cert lender.

As long as you can prove your income, and many lenders are flexible on how this can be done, a status mortgage will normally offer higher loan amounts than self cert deals

AndrewSmith

Never forget that although a Self Certify mortgage means that the lender 'may' not require evidence of income you have to be aware that the mortgage company will reserve the right to take up any references it see's fit in approving your application.

Too often people forget that a lender has no obligation nor does it have to actually lend you anything, and can reject or refuse an application without reason or explanation.

It is a condition of the declaration you sign at the end of the mortgage application in which the lender states that by signing you are authorising them to carry out any checks or referencing they see the need to.

It is not unheard of for mortgage companies to check your national insurance number against the Inland Revenue to make sure that you are either employed or self employed.

I have also known lenders who, having seen bank statements with a self certify case, have smelled a rat because the income declared does not tie up with money going throught the bank accounts.

When you complete a self certify application you will have to sogn to say that the information you are giving is true to the best of your knowledge and that false provision of such information will leave you subject to prosecution.

As I said earlier, I have actually seen a broker and client go to prison for 10 years for inflating the clients income by 50% to get a mortgage.

Self certify also does not change the multiples that the lender will apply. They are still between 3.5-4.5 x single income.

It is not only the lender that reserves the right to scrutinise the file either. If applying though a broker, his files will be subject to compliance review by internal auditers and, if needed, the FSA regulator themselves.

Even if you apply directly to a lender they are still subject to the same regulatory scrutiny.

Everyone cries out about 'responsible lending' in this country. What about 'responsible borrowing?'

I can guarantee that if you self certify inflating your income, can't afford the payments and get reposessed you would be blaming the lender.

It really is the same as saying 'dip your hand in the till if you think no-one is looking', and is treated thus in the eyes of the law. Trust me I have been doing this long enough now to know.

If you are prepared to run the risk of up to 10 years in prison for fraud, then do it. If you are sensible you will see that it is not worth it.

jamesd

AndrewSmith, understandably your focus is on what can get people into major trouble. But moving on to more sensible people, how do mortgage lenders handle cases of projected business income that is reasonable even if not yet supported by past business profits? Do they accept it at all and with what caveats and declarations to ensure that all parties are fully informed of the basis for the figures? That is, what is reasonably prudent guidance for those who are not trying to play the system for illegitimate gain?