As a contractor, qualifying for a mortgage can be slightly different than for someone in permanent employment. However, with the right preparation and approach, you can secure a mortgage that meets your needs.
Here’s what you need to know about how to qualify for a contractor mortgage.
1. Proof of Income
Lenders need to see that you can afford the mortgage payments, which means proving your income. As a contractor, this can be done in several ways:
Current contract details: This includes your day rate or hourly rate and the length of your contract.
Bank statements: Lenders often request your personal or business bank statements to verify that payments are being received regularly.
Accounts or tax returns: Some lenders may still ask for proof of income over the last 1–2 years, especially if you’re self-employed through a limited company.
For contractors, some specialist lenders use your contract rate × 5 days × 46 weeks formula to calculate your income.
2. Credit Score
Your credit score is an important factor in qualifying for a contractor mortgage. A higher score generally means better rates and easier approval. Ensure that your credit history is free from issues such as missed payments, defaults, or bankruptcies.
Tip: Check your credit score regularly and fix any issues before applying.
3. Deposit Size
As with any mortgage, having a larger deposit can improve your chances of qualifying for a better deal. For contractors, lenders may accept deposits as low as 5–10% of the property value, though a larger deposit (e.g., 20%) can help improve your borrowing options.
4. Length of Contracting Experience
While there’s no set rule, most lenders prefer contractors with a proven track record. If you’ve been contracting for at least 6–12 months, you’re in a stronger position to qualify for a mortgage. Longer periods of contracting can offer better terms.
5. Choosing the Right Lender
Not all lenders are familiar with the intricacies of contractor income. Working with a specialist contractor mortgage broker who understands your situation is key. A broker can match you with lenders who specialise in contractor mortgages and ensure you get the best deal.
Final Thoughts
Qualifying for a contractor mortgage is very possible with the right preparation. By proving your income, maintaining a strong credit score, and working with a broker who understands contractor needs, you can find the perfect mortgage for your situation.
At Contractor Mortgage Solutions, we’re here to help you navigate the contractor mortgage process with confidence.