Self employed mortgage questions

gurner

Hi there,
I've been reading the advice on the board for a while now, but find myself in the position of requiring some information.
I have gone self employed this month and have started on a contract. Naturally I have no earnings or turnover evidence to produce only the knowledge of the market and the potential rates I can get for the work I do. My wife and I have seen a house that we like but would mean extending our exisiting borrowing. We would have around a 60000 deposit and would require borrowing of around 180000 but would give an LTV of 75%.
Does anyone know if Nationwide would touch this sort of business as we have a tie in with them for the next year or so? It's not essential as we would pay the fee to transfer if required.
From reading on the forums I gather that using a broker would be the best avenue to persue this, would they be able to make a case based on my earning potential?
Finally, are rates competitive in the self employed/self cert market?
Up to this point I have always been employed and can show a good earnings history in addition I have a clean payment history on mortgages, credit cards etc...

Many thanks for any assistance anyone can provide on this.

Conrad

Most lenders will want historic earnings of the client.

A few will accept newly self - employed clients and base the level of advance upon a projection.
Nationwide wont be able to assist Im afraid.

You tend to pay a slightly higher rate for such deals but on the plus side the Tax self - employed people pay is always a lot less than an equivalent salaried person. I see many clients earning substantial sums that have Tax bills of just a couple of thousand per year.

easilyamused

I don't know if this will be of any use to you but I thought I'd just post our experience anyway.

OH had been self-employed for only about 4 months when we started looking around for a mortgage. Most lenders wouldn't touch us but after we viewed a property through the Halifax, they invited us in to see what they could do for us mortgage-wise. We were very cynical that they'd be able to do anything, but they ended up offering us a 2 year fixed rate at 4.19% and didn't care a jot about seeing any proof of earnings or payslips or the like, as we were apparently such a good risk as we'd got a top notch credit record. We were putting down a 35,000 deposit and taking out a mortgage for 100,000 which also won favour with them.

So it might be worth checking them out if you've got a good enough credit score?

santana-mx3

Easilyamused - that's very interesting. I have a joint mortgage application in progress with another lender. I am considered to be self-employed (although I'm not) because the proportion of shares I have in the company I work for is over their limit for an employee. When my wife spoke to them recently to see how our application was progressing, they told her that our credit rating was so good that they don't need to take up employment references/see payslips/contact accountants etc. I assumed that the person she spoke to had got that completely wrong and that they couldn't possibly go without those checks purely on the basis of a good credit rating. I'm still a bit dubious about it but we'll see.

AndrewSmith

Halifax will consider it below 75% without necesarily having to provide income proof.

gurner

Thanks for the posts so far.
I have found UBC, Nationwide's specialist lending arm, problem is the site appears to be tailored for advisers as opposed to new customers and the helpline has not proved too useful.
The question is are UBC lending criteria likely to be favourable to my situation and, more importantly, would this count as continued custom with Nationwide? i.e. avoids having to fully pay exit penalty?

Otherwise, looks like Halifax might be a good first port of call. Then to hunt down a mortgage adviser and make sure I get the best deal I can and whether there is a realistic possibility of borrowing the amount required.
Any suggestions for advisers in the Sandhurst/Camberley area? Recommendation is always a good place to start!

Cheers!

AndrewSmith

Personally I would engage the Advisor before visiting the Halifax. Let the advisor assess your situation and then, using his/her experience and knowledge, discuss with you the most likely lenders to accept your case.

Sandhurst eh? I have a couple of clients there. I play golf sometimes with them on the course in the woods. Smashing driving range with all the mini bunkers and greens.

Be careful of approaching too many lenders by yourself as each one will carry out a credit search whoch will be logged on your file.

Hope this helps

Andy

jamesd

Andy, "credit search" rather than "quotation search"? Why the former when the latter will apparently do the job when shopping around?

AndrewSmith

Lenders will carry out credit searches whenever you visit them or approach them for a quote. As the Original Poster is thinking of making Halifax his 'first port of call' it is pertinent that the point is made.

With respect, a quotation is worth nothing until it has been agreed by a lender.

Also as this is not a standard case most of the 'online quote engines' will be set up to generate non status quotes without considering high street mainstream routes.

Also remember that a large number of these 'quote engines' are in fact nothing more than lead generation services for brokers / advisers. You input your details, the owner of the site sells it to the highest bidding broker firm.

Moneysupermarket are a classic example of this, selling the details of people enquiring via a company called PAA leads.

The reason it is a good suggestion of the OP to visit an adviser is that the adviser will have industry only sourcing software along with a knowledge of the marketplace. He/she will have a good idea of who will or will not accept the case before any credit searches are carried out.

jamesd

Sorry, I offered you too little context. Here's more:

AndrewSmith wrote:

Be careful of approaching too many lenders by yourself as each one will carry out a credit search whoch will be logged on your file.

'For over a year credit reference agencies have allowed lenders to use “quotation searches”. These give the lender exactly the same access to your credit file as an ordinary credit search, and cost them the same search fee. The only difference is the audit trail they leave behind. A quotation search makes it clear that the credit check has been carried out because the borrower is sensibly shopping around, and not because they are recklessly applying for reams of credit. ... Quotation searches have to be offered by mortgage lenders' (Personal loan lenders' dodgy practices, one year ago)

"'If the terms of a product depend wholly or partly on the consumer's credit reference data, a firm may need to undertake a credit check to give the consumer an illustration of cost. To enable firms to provide quotations on such 'risk-based pricing' products, the best practice guidelines state that firms should use an 'enquiry search' or 'quotation search'. These register a different type of footprint on the consumer's record (sometimes called a 'soft' footprint).

However, firms must not use this search when providing quotations for standard priced products (because a search is not necessary), nor where the consumer is seeking a commitment from the lender to lend. The purpose of the enquiry search is to enable consumers who only want cost information on a risk-based product, to get a quotation (a KFI) without having to 'apply for credit'. Where a firm uses a quotation search and the consumer subsequently applies, the credit reference guidelines require the firm to undertake a full credit application search to register that the consumer is subsequently applying for credit." (FSA FAQ on the Mortgage Conduct of Business Rules)

Given this, I don't understand why a lender would carry out a search that is apparently contrary to the Mortgage Conduct of Business Rules and directly and unnecessarily harmful to the interests of the consumer.

If your experience is that lenders do use credit searches when consumers are merely shopping around and asking about availability and pricing, that's well worth knowing - hence my question to you about the credit check type involved.

homer_j_3

AndrewSmith wrote:

Personally I would engage the Advisor before visiting the Halifax. Let the advisor assess your situation and then, using his/her experience and knowledge, discuss with you the most likely lenders to accept your case.

Be careful of approaching too many lenders by yourself as each one will carry out a credit search whoch will be logged on your file.

Andy

I agree whole heartedly with this statement, not because I am a broker but because it makes sense.

Why go to a lender and then to a broker to see how it compares when the broker (providing they are whole of market or have them on their panel) will be able to see what the halifax can offer and what other products are available.

The broker will be able to tell you what costs are involved, what the monthly payment is etc. More importantly they will have a good idea whether you will be wasting your time with a lender if you do not meet their lending criteria.

If you want to shop around for quotes then that is fine, you will spend hours doing what a broker can do in a fraction of that time.

With regards to the quotation system, as a broker, we wouldnt necessarily have to have to consider in what we do as we do not search the market in the way a consumer does.

However, where the process does meet is when you actually find a product that you want to proceed with and need to gain that agreement in principal.
It is when you start going for loads of these that you can effectively stuff your credit up.