Applying for a mortgage when you’re self-employed

You can apply for a mortgage when you’re self-employed, but lenders need evidence of your income and that you can afford the repayments. Depending on what they require, this can include accounts, bank statements and tax documents. How much trading history you need varies. There isn’t one rule for every lender. MoneyHelper: mortgage applications.

The most useful preparation is a clear, consistent set of records and an early conversation about what the lender needs.

What income evidence might a mortgage lender ask for?

Depending on the lender and your circumstances, the documents they ask for can include:

• business accounts

• bank statements

• tax calculations

• tax year overviews

• evidence of other income

MoneyHelper says lenders may ask for two to three years of accounts, but requirements vary. MoneyHelper: mortgage applications.

An SA302 is HMRC’s tax calculation. A tax year overview is a separate document. If your lender asks for both, one doesn’t replace the other. HMRC explains how to get them, including if you used commercial software to file your return. HMRC: evidence of earnings.

Ask how your income will be assessed

Don’t assume every lender averages the same years, or treats a company director’s income in the same way as a sole trader’s profit. Ask what evidence they need and how they’ll calculate your income, especially if you’ve recently started, changed your business structure or had an unusual year.

Be ready to explain any changes, with your records to back up what you say. Keep your figures accurate and consistent across documents, rather than rounding them up to make the application look stronger.

Look beyond the income figure

A lender also looks at your spending, your debts and whether you can afford the repayments. Work out your own household budget alongside the application, and allow for quieter periods and the costs of buying and moving. What feels manageable in your own cash flow? A borrowing offer isn’t a substitute for knowing that. MoneyHelper: applying for a mortgage.

A mortgage adviser who’s used to self-employed cases can help you find suitable options and explain what evidence you’ll need. Ask about their fees and the range of lenders they look at. MoneyHelper: choosing a mortgage adviser.

If you’re renting instead

Before you pay for documents or make financial commitments, ask the agent or landlord what proof of income they accept. Keep your accounts, tax records and relevant statements to hand, and check the tenancy rules for your part of the UK. There isn’t a single referencing process for self-employed people that every landlord uses.