Borrowing can be more complicated for prospective homebuyers who are self-employed. The main difference is that you will have to meet stricter eligibility requirements. Most lenders will need to see 2 to 3 years' proof of income.

The amount you can borrow can range from 3.5 to 5 times your salary, depending on the lender, the size of your deposit, and your situation.

The good news is that most lenders don’t charge you higher interest rates than for a salaried buyer.

Dive into our guide to understand self-employed mortgage rules and how to increase how much you can borrow when you are self-employed.

What kind of mortgages can I get when self-employed?

There is no specific mortgage dedicated to self-employed borrowers. The difference lies in the criteria you need to meet to qualify and obtain the mortgage. You can apply to the same mortgage products as a salaried person.

To ensure your application is successful, you need to provide lenders with as much information about your finances as possible.

What documentation do I need to provide lenders?

As a self-employed prospective buyer, the documents you need for a mortgage application are:

• Two or more years of certified accounts – prepared by a qualified accountant
• SA302 forms (or an HMRC tax overview) for the last two or three years
• Passport or driving licence
• Recent utility bills
• Bank statements for three to six months
• Evidence of your deposit

Am I considered self-employed by lenders?

If you own at least 20% of a business and its proceeds make up your primary income, you are generally going to be considered as self-employed. There are 3 main categories of self-employed professionals that you fall under depending on the way your business is set up: sole trader, contractor and director.

A sole trader is when you own and run a business by yourself (responsibility is solely yours). Sole traders can have employees too, but the sole trader remains in charge of the business.

Contractor typically means you provide services or skills to another business for a set or contracted period – be it in hours or project duration. A contractor could be a sole trader or run their own limited company.

Director of a limited company is when responsibility for a business is shared between directors, also called partners or shareholders.

Is being self-employed bad for my credit score?

No, being self-employed doesn't directly impact your credit score. Employment history, including self-employment, may appear on your credit report if you listed it when applying for credit, but it’s not a factor in calculating your credit score. No matter your work situation, you should always check your credit score before applying for a mortgage.

It is important to bear in mind that some lenders might view self-employed borrowers as riskier. This is due to income variability and potential debt from business investments. This perception could make it harder to get credit, especially if your income is inconsistent or your debt-to-income ratio is high.

Credit score is a measure used by lenders to assess the risk in lending you money

What is the debt-to-income ratio?

The debt-to-income (DTI) ratio is a measure used by lenders to compare the amount of debt you owe each month to your gross monthly income (your income before taxes). It’s a way for lenders to evaluate how manageable your debt is relative to your income, and it can influence your ability to qualify for new credit or loans.

You can calculate it by dividing your total monthly debt payment by your monthly income before tax. You then multiply the results by 100 to obtain a percentage.

For example, if you have total monthly debt payments of £1,500 (from things like mortgages, car loans, student loans, and credit card minimum payments) and a gross monthly income of £5,000, your DTI ratio would be 30%

Can I get a mortgage with a shorter income history?

Yes, you can get a mortgage with less than 2 to 3 years of accounts. However, it will be harder. If you don’t wish to wait a couple of years, you can reach out to specialist lenders who might be more flexible and willing to consider unique situations like yours. Regardless of how long you have been self-employed, you should make sure your application is as solid as possible.

How can I increase my borrowing power when self-employed?

Everything starts with keeping good records and having a healthy credit score. Pay your bills on time and don't use too much of your available credit to show lenders you're reliable. While it's good to claim business expenses on your tax return, don't go overboard - lenders look at your taxable income when deciding how much to lend you.

Having money saved is really important. Work towards a bigger deposit and keep some savings in the bank - this shows lenders you can manage money well, even if your income changes month to month. Try to pay off any debts you have, as this makes you look better to lenders. It also helps to keep your business money separate from your personal accounts, as this makes everything clearer when you apply for loans.

Getting help from professionals can make a big difference. Use a qualified accountant to check your books - this gives lenders more confidence in your finances. Show them that your income is steady or growing by highlighting regular clients and ongoing contracts. Try to apply for loans when your business is doing particularly well, as this creates the best impression.

Working with the right people can open more doors. Find a broker who knows about self-employed mortgages, as they'll know which lenders are most likely to help you. Look beyond traditional banks to online lenders, who might be more understanding of self-employment. If you're finding it hard to get a standard mortgage, Shared Ownership could be worth considering - you'll need a smaller deposit and mortgage to get started with property ownership. You can even use our affordability calculator to estimate what home you could buy through Shared Ownership.

Getting a mortgage when you’re self-employed can be a bit more complicated, but it’s definitely possible if you’re well-prepared. Keeping clear financial records, building a good credit score, and getting help from professionals like accountants and mortgage brokers can all improve your chances. Remember, while some lenders may have stricter rules, there are also specialist lenders and options like Shared Ownership to help you get started with owning a home. With careful planning and the right support, you can work towards buying your own home with confidence.