As a contractor, securing a mortgage can be a daunting task. With an irregular income and no guaranteed paycheck, it’s no surprise that contractors are often turned away by traditional lenders. However, there are options available for contractors looking to buy a home. In this article, we’ll explore everything you need to know about mortgages for contractors, from the application process to the types of mortgages available mortgages for contractors
Understanding Mortgages for Contractors
Contractors are self-employed individuals who work on a project-by-project basis. While this type of work can be lucrative, it can also be unpredictable, making it difficult to secure a traditional mortgage. However, there are lenders who specialize in providing mortgages to contractors. These lenders understand the unique financial situation of contractors and are able to work with them to find a mortgage that suits their needs.
The Application Process
The application process for a mortgage as a contractor is similar to that of a traditional mortgage. However, there are a few additional pieces of information that lenders will need. Contractors will need to provide evidence of their income, which can be in the form of tax returns, bank statements, or invoices. Lenders will also want to see a track record of work and contracts, as this shows that the contractor has a stable income stream.
Types of Mortgages for Contractors
There are several different types of mortgages available for contractors. The most common types are fixed-rate mortgages and adjustable-rate mortgages. Fixed-rate mortgages have a set interest rate for the life of the loan, while adjustable-rate mortgages have an interest rate that changes over time.
Another type of mortgage available for contractors is a self-certification mortgage. This type of mortgage is designed for self-employed people, including contractors. With a self-certification mortgage, the borrower self-certifies their income, which means that they don’t need to provide as much documentation as they would with a traditional mortgage.
Tips for Securing a Mortgage as a Contractor
Securing a mortgage as a contractor can be challenging, but there are steps you can take to improve your chances of success. Here are some tips for securing a mortgage as a contractor:
- Save for a larger down payment: A larger down payment can improve your chances of being approved for a mortgage.
- Improve your credit score: A higher credit score can make you a more attractive borrower to lenders.
- Consider a joint application: If you have a partner with a stable income, a joint application can improve your chances of being approved for a mortgage.
- Work with a specialist lender: Specialist lenders understand the unique financial situation of contractors and are more likely to approve your application.
Securing a mortgage as a contractor may seem daunting, but it is possible. By understanding the types of mortgages available and working with a specialist lender, you can find a mortgage that suits your needs. Remember to provide as much evidence of your income as possible and to work on improving your credit score. With these tips in mind, you’ll be well on your way to securing a mortgage and buying your dream home.