Lenders usually consider several factors before deciding whether or not they can lend to an applicant. For contractors, lenders consider more precise criteria; because contractors don't have pay slips and fixed income like permanent employees.
The income of contractors may change during different months and have many fluctuations. For this reason, the borrowers will examine the contractor mortgage requests more carefully and receive more documents from them. In general, the contractors' income, type of property, and credit score will be very effective on the lenders' decision.
How Can Contractors Improve Their Chances of Getting a Contractor Mortgage?
Lenders always seek evidence that contractors can pay their monthly mortgage instalments on time. Therefore, lenders need to prove the income of contractors.
- Contractors should be careful enough in preparing, compiling, and presenting their documents to prove their affordability to the lenders in a good way. Generally, it can be useful to show evidence of renewal of contractors' deals and provide evidence of ongoing contracts with employers.
- The submitted documents must prove that there is not a long gap between the contractors' contracts and that there will not be a long gap in their income.
- Some lenders may also be strict about business expenses and contractor inputs and outputs. Therefore, contractors should provide more documents and clarify this connection.
- Improving the credit score and increasing the deposit amount will also help increase the chances of contractors getting a contractor mortgage.
Key Tips to Secure Contractors Mortgages
To secure a mortgage, contractors must take important steps to secure their mortgage or improve their chances of getting a contractor mortgage. Here are some of the most important tips for contractor mortgages:
- Proof of future income
As possible, contractors should provide more evidence of their income. Prepare evidence such as bank statements, future invoices, and previous and current contracts.
- Credit Score
Contractors should make sure their credit score is good.
- Deposit
The contractors' main concern is gathering enough savings to pay the deposit. It is a common belief that lenders will get a large deposit from contractors to get a mortgage. But the fact is that there are lenders in the market who are fully aware of the income-generating potential of contractors and will get a good deposit from them.
However, lenders always try to get as much deposit as possible from contractors. Because more contractors can pay more deposits, their credit risk is reduced, so lenders will be more willing to pay contractor mortgages. But in general, depending on the affordability, credit score, and records of contractors, lenders consider different ratios as deposits.
- Using a contractor mortgage broker
Contractors should use contractor mortgage advice to find the right mortgage. Therefore, it is very important to seek expert advice from those familiar with contractors' unique challenges. A contractor mortgage broker can tell contractors what different lenders are looking for, which lenders they should go to, and how to get the best deals.
In addition, brokers handle the entire process from applying to getting a contractor mortgage on behalf of contractors so that contractors can feel relaxed and comfortable. Contractors need to make sure they choose a contractor mortgage broker who can search the entire market, or they will find their options limited.
- Eliminate gaps between contracts
Contractors should make every effort to reduce gaps between their contracts. This is very important for lenders as it will greatly reduce the credit risk of contractors.
- Providing the required documents
Contractors must provide documents related to their income in the past months, their work records, certificates and licenses, current contracts and documents related to their future statuses, and other documents to the lenders. In addition, to prove their income, contractors must provide bank statements, status statements, tax returns, business accounts, and contracts to lenders.
- Proof of borrowers' affordability
Lenders use different methods to estimate the affordability of contractors. Some of them base their evaluations on the average income of contractors in recent years, and others base on the lowest annual income of contractors. But there are also lenders in the market who, knowing how contractors work, base their daily rate on their average annual income.
- Identifying suitable lenders
Depending on the type of lenders' evaluation method, the affordability of contractors will vary greatly, especially if the contractors' income has fluctuated a lot in recent years. For this reason, it is very important to identify lenders with sufficient knowledge of contractors' business nature.
The Importance of Using Aws Mortgage Advisors
As a specialist contractor mortgage broker, AWS Mortgage has a dedicated team to deal with the best lenders daily. AWS Mortgage advisors know the issues, questions, and criteria lenders look for in approving contractor mortgage applications.
AWS Mortgage advisors are fully familiar with what different lenders offer and provide the necessary advice to contractors in all stages of applying for and getting a contractor mortgage.