Contractors who are declined a mortgage could certainly be forgiven for being concerned. However, it is not entirely uncommon or unusual for a contractor mortgage to be declined when a lender is approached directly.
Why does this happen?
Contractor mortgages are often declined due to a lack of understanding around the ways in which contractors are paid, and the longevity of their income. Often the documentation that they require is near-impossible to obtain, which means they will believe that the requested borrowing amount is unaffordable.
If this is what has previously happened to you, you shouldn’t be discouraged. There are steps that you can take, and alternative ways to get the funding that you require.
What to do should you be declined
The first thing you need to do is establish where the application went wrong. It is very important to speak to your estate agent, explaining what has happened, which will relieve any pressure that exists between the two of you. They will also be able to give you a good insight into whether the vendor is willing to persist with you as the preferred buyer.
Once this is established, it is time to employ the services of someone with specific knowledge of contractor mortgages. A specialist will have valuable insight into your manner of working and finances, and will ensure that your chosen lender understands your work status and the financial implications of it before making a full application. This will dramatically minimise the risk of a declined application.
Unfortunately for contractors, there are a number of unfair perceptions surrounding contractor mortgages and the risk that they present to lenders. However, contractors can hold the upper hand when they choose the specialist who is arranging the mortgage.
Other tips that applicants should consider are:
- Know your minimum deposit – The minimum deposit required is 5%, however, lenders tend to favour individuals with higher deposits. To access the most competitive rates, you should be aiming for anything between 10 and 25%.
- Update all the relevant paperwork – You will need to provide minimal paperwork to support your application, but it is important that your CV is up to date as a proof of your skill and experience. You will also need a copy of your current contracts to demonstrate your earnings.
- Contract History – Ensure you have the contract history which is required.
- Keep your credit report as clean as possible – Credit reports with a negative outlook can be disruptive at the best of times, for a contractor mortgage, this can cause further disruption. Keep your credit report as clean as possible.
If you would like to discuss your mortgage application with a skilled adviser from the Just Mortgage team, get in touch today. You can call us on 0800 114 3575 or use our contact form. Alternatively, you can email us at [email protected].