Imagine being a contractor just getting back to work after having taken an extended amount of time off.
Maybe you set aside working for 12 months so you could have a baby. Perhaps you spent the last couple of years providing care to a sick family member. Now you are ready to get back to work. You are also ready to buy a home.
Buying a home can present a few challenges to contractors that employed workers do not face. Getting a mortgage is just one of them. Contractors tend to have to put more effort into demonstrating their income for obvious reasons. They also have to make an extra effort to convince lenders they will have sufficient work to cover the mortgage for its entire term.
This article is dedicated to helping contractors just getting back to work to obtain mortgages. We are thinking mainly of work-at-home contractors, but the principles explained here certainly apply to those contractors who work outside the home as well.
Don't Even Consider Direct Application
Right off the bat, the most important principle for contractors is to not even think about applying for mortgages directly with banks and building societies. Going the direct route just makes getting a mortgage more complicated than it has to be. It's better to work with a contractor mortgage broker instead.
A contractor mortgage broker is an independent mortgage broker with experience helping contractors. They do not necessarily limit their business to contractors, but they have extensive experience working with them. They know what it takes to find and secure great mortgages for those workers whose livelihoods do not fall under the traditional employment paradigm.
Pull Out Those Records
Given that this article focuses mainly on contractors just getting back to work after a long layoff, records from past jobs play a role here. Those records should be pulled out and dusted off. They could be the deciding factor among lenders not quite sure if an applicant is worth the risk.
The more records a contractor has, the better the chances of approval. Five years of records would obviously be more helpful than just two. And by records, we mean everything from invoices to proposals and the actual contracts themselves. Every bit of information is helpful in obtaining a mortgage.
As a side note, self assessment tax returns are excellent records for proving past income. They are considered reliable and accurate proof for lending purposes.
Settle on a Payment Model
How a contractor gets paid is also important to lenders. There are generally two classifications lenders work with: daily rate and per-job pay. Under a daily rate scenario, a contractor works under a written contract that guarantees a specific rate of pay for every day worked. These kinds of contracts go a long way toward demonstrating future income potential.
The other model is based on how much a contractor earns per job. A contractor might be forced into this model by virtue of having no long-term contracts offering daily rates. Other contractors may prefer to work this way. Still others get paid per job because that is what their particular industry demands.
At any rate, the method of payment will dictate how the contractor proves income. The less consistent the contractor's pay, the more effort he or she will have to put into proving sufficient income.
Refuse to Settle
The contractor just getting back to work after an extended time away is already someone who doesn't do things according to convention. There is no reason to change that in the search for a mortgage. So this last piece of advice is to not settle for just anything. Do not settle for convention simply for convention's sake.
Contractors deserve the best possible mortgage deals just like their employed counterparts. Sometimes, finding those deals takes a bit of persistence. Contractors may have to stand firm and insist that their brokers keep looking to find something better.
If you are a contractor just getting back to work, do not let your status discourage you from pursuing your dreams of home ownership. Look around for a reliable mortgage broker with a proven track record of helping contractors like you arrange mortgages.
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