Mortgages for contractors with bad credit

Can you get a mortgage if you’re self-employed or a contractor with bad credit?

The good news is that there are lenders out there who specialise in lending to self-employed professionals and contractors, and it’s an area of the market that’s growing. Since Covid and 2022’s mini-budget, lenders have been more accepting of the financial ‘blips’ that can happen and affect people’s finances. The lenders are becoming more open in what they will accept, including how long someone has been self-employed.  

Bad credit mortgage lenders take a more personal and flexible approach to approving mortgages for self-employed people with bad credit and in non-standard employment compared to most high street lenders.

Do note that not all bad credit lenders have the same eligibility criteria. For example, some will be happy to take on customers who have missed a bill payment in the last six months, whereas others will only accept missed payments older than two years, and some will be happy to approve applicants with Debt Management Plans (DMPs) or Individual Voluntary Arrangements (IVAs), where others won’t.  

How do lenders assess self-employed and contractor income?

• Trading history
• Accounts
• Tax calculations
• Evidence of contract income where relevant.  

What else can affect your mortgage options?

• Deposit size
• Loan to Value
• Affordability
• How recently a credit issue occurred
• Whether there have been further problems since.  

Will mainstream lenders consider contractors with bad credit?

If you’re self-employed or a contractor with bad credit, you may think that mainstream lenders are unlikely to consider you. However, different lenders have different eligibility criteria, which mean it’s still worth looking into what they offer. Yes, mainstream lenders may be restrictive in some circumstances, but don’t rule them out automatically. It’s important to understand your options before you start applying.  

How can a mortgage broker help?

Being self-employed or a contractor means you need to supply different information, which can make the mortgage application process a bit more complicated. Add to this bad credit and things begin to get even more complex.

This doesn’t mean you won’t be approved for a mortgage, but it does mean that you’ll need a lender who understands bad credit and is more flexible and open to nuanced financial circumstances, like being self-employed.

In this situation, it’s best to get professional advice and support from an experienced bad credit mortgage broker. Bad credit mortgage brokers are used to helping people with a range of credit issues, understand what different specialist lenders can offer and who they’re likely to accept. They can also recommend ways to strengthen your application and have access to a wide range of providers, including special deals and rates that you wouldn’t otherwise have access to.

Specialist lenders often only work through intermediary brokers. This means going through a broker is also the best way of making sure you’re getting access to the most suitable lenders and the better value deals on the market that take account of your employment status, financial circumstances and mortgage needs.

It’s also a good idea to approach your broker before you start applying for bad credit self-employed mortgages. If you approach the wrong lender directly and are declined, you could damage your credit profile even more, with a hard credit check appearing on your record. A bad credit mortgage broker will know the market well, understand the eligibility criteria of different lenders and be able to help identify the best lender before you start applying. If you’re keen to find out more, get in touch with our Nottingham-based team.