Self-Employed Bad Credit
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Self-Employed Bad Credit
James Bull explains how the mortgage process works if you are self-employed with bad credit.
What are the main challenges self-employed individuals with bad credit face in securing a mortgage?
The main challenge really with bad credit is that you may not pass the lender’s credit score – especially with the high street banks.
As a mortgage broker, we would obtain a copy of the client’s credit report up front. Based on that we’ll see which lenders might be available to accept the credit situation.
How can self-employed individuals with bad credit improve their chances of getting a mortgage?
Ultimately, your credit report goes back for six years. So once you’ve got bad credit, it’s difficult to do anything other than just sit and wait six years for your credit to improve.
We’ll give you personalised advice, based on what’s on the credit report. We’ll see which lenders will accept you. If there are no lenders, we can give you a plan of what to do and when in order to get the mortgage in future.
What documentation do self-employed individuals with bad credit need when applying for a mortgage?
It’s the same documentation as for anyone else applying for a mortgage, even with good credit. The only additional thing is the credit report.
You need proof of income, so if you’re self-employed, that’ll be either your SA302s and tax year overviews, or your accounts. Then we need your bank statements – business and personal – and proof of ID, your address and your deposit.
Can self-employed individuals with bad credit get a mortgage without a large deposit?
The answer to this varies depending on the extent of your bad credit and, particularly, how old the issue is. We do have lenders that have a tolerance for adverse credit with just a 5% deposit.
The more recent the bad credit is, typically the more deposit you’ll need. Some lenders may require a 10%, 15% or even 25% deposit.
Again, we give personalised advice on that for every individual client, based on what’s on their credit report.
What interest rates can self-employed individuals with bad credit expect to pay on a mortgage?
That’s a very difficult one to answer because it depends specifically on what the bad credit is.
It goes without saying that the interest rate will be higher than you’ll get on the high street. As mortgage brokers, we can give personalised quotes for clients once we’ve got the credit report and looked into it.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
What role does credit score play in getting a mortgage as a self-employed borrower with bad credit?
This can be a bit of a misconception, because a lot of the lenders that accept bad credit don’t actually credit score.
The other thing to bear in mind is that there are four different credit reference agencies and they all have different scores. A 999 with one might be a 253 with another.
When we’re looking at a mortgage, the score itself is not the most important thing. It’s the detail behind each individual item on the credit report and what’s caused it.
Do any mortgage lenders specialise in lending to self-employed individuals with bad credit?
Yes, many mortgage lenders are more than happy to lend to self-employed individuals. They have specific, specialised policies to help self-employed applicants get a mortgage. Again, we can just give personalised advice for each individual circumstance.
What steps can self-employed individuals with bad credit take if they have been declined for a mortgage?
If you’ve been declined with a high street lender, get in touch with a broker like ourselves. We help self-employed applicants with bad credit get a mortgage every single day.
We’ll take all your details and request a copy of your credit report. We’ll take that away and make recommendations on that basis.
How long does it take for self-employed individuals with bad credit to get a mortgage offer?
There’s no specific answer to this as it does vary from lender to lender. It depends on lenders’ service levels and how busy they are, which does vary. On average, we would expect most mortgages to be approved within about three weeks.
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