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Podcast approved by The Openwork Partnership on 09/02/2025
Self-Employed Mortgage Bad Credit
Lee McAteer explains how the mortgage process works if you are self-employed and have bad credit.
What are the main challenges self-employed individuals with bad credit face in securing a mortgage?
The main challenge is the limited number of lenders that will allow self-employed applicants with bad credit. You may need a higher deposit, and you may need a longer track record of your income.
But when you speak to a broker, they siphon through all that for you and find the right option for your circumstances. It may not necessarily mean you need a high deposit. It may be that we could find a lender that accepts the deposit you want to proceed with. Speaking to a broker as early as you can and will definitely help.
How can self-employed individuals with bad credit improve their chances of getting a mortgage?
First and foremost, you need to have a look at your credit file and see what is actually on there. Have any issues been reported on all three main credit reports – Equifax, TransUnion, and Experian?
Make sure that you are registered on the electoral roll, and check you haven’t missed any payments in the past six months. Also, look at what’s on your credit file and how long things have been on there. The longer ago an adverse event happened, the easier it may be for you to obtain a mortgage.
If it’s a default or a CCJ, has that now been satisfied? Again, it could go in your favour if it has been settled.
What documentation do self-employed individuals with bad credit need when applying for a mortgage?
The main documents you’re going to need when you’re self-employed are your accounts, tax calculations and tax year overviews. Those will show any profit, salary and dividends. You also need bank statements from the last three months, both personal and business.
We could have a good look at those and see which lenders will use different forms of income to put you in the right position.
Can self-employed individuals with bad credit get a mortgage without a large deposit?
You certainly could. It depends what you determine as large, as well as what adverse event has happened and when. Some adverse events are accepted by high street lenders, so it doesn’t necessarily mean you’re going to pay a higher rate of interest or need a larger deposit. It just depends on the details.
What interest rates can self-employed individuals with bad credit expect to pay on a mortgage?
It depends. If we could get you a mortgage with a high street lender, that’s going to be cheaper than an adverse lender. Specialist lenders will accept more applicants, but generally they’ll require a higher deposit.
Everyone’s circumstances are different – in terms of when events happened and if they’ve been repaid or not. It all depends on your situation.
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What role does a credit score play in getting a mortgage as a self-employed borrower with bad credit?
The higher the score, the better, but lenders all use their own scoring systems and they don’t like to share those with brokers or applicants. You’re not automatically going to get a mortgage if you’ve got a score of 750, for example.It’s just down to the lender’s criteria and if you’re going to fit that.
It’s important when events happened and how much they were for. If you’ve got a default or CCJ worth less than £500, for example, that potentially could be accepted with a high street lender.
If it’s more, but it’s settled and it was over three years ago, again, that could be acceptable with the high street. Speaking to a broker as early as possible will give you a good chance of being approved.
Do many mortgage lenders specialise in lending to self-employed individuals with bad credit?
Certain lenders are more self-employed friendly in terms of income and borrowing capacity. There’s no specific lender for self-employed people with bad credit. They’re treated the same.
If you’re self-employed, certain lenders are more flexible with your affordability. If you’ve got bad credit as well, you’re limited in the lenders you could go to – especially if you’re looking for an income stretch, for instance.
What steps can self-employed individuals with bad credit take if they have been declined for a mortgage?
First and foremost, you need to find out why you’ve been declined. What’s on your credit report that’s causing that decline? If it is an error, perhaps that could be rectified.
Depending on when it happened, we could wait for a number of months and it will then be more acceptable to lenders. It’s all about discovering the reason and speaking to a broker to put a plan in place.
If you can’t do it now, when can you do it? We could set out a clear plan to signpost when it will be the right time to seek out a mortgage.
How long does it take for self-employed individuals with bad credit to get a mortgage offer?
There’s no real difference, as long as at the point of application, the broker has all the required information to send onto the lender.
Generally within a week or two, we should have a mortgage offer through. Completion times will depend on the lender’s service levels at that point in time. But in most cases, one to two weeks is generally the right time frame.
What else do we need to know about getting a mortgage for the self-employed with bad credit?
Look at your credit file before looking to apply for a mortgage – or if you’re just thinking about buying a home in the future. Check if there is anything on that credit file that shouldn’t be there, that we could get rectified.
You don’t want to be trying to sort this out at the point when you’ve found a property. If there are errors or something you need to pay off, it can take a few months for that to be updated.
So have a look at your credit report and speak to a broker as early as possible. Then you could make sure you could put your future plans into practice.
We offer an hour-long appointment where we’ll have a look at your income, outgoings, credit report and discuss the mortgage options available to you. We’ll put you in the right position possible for when you’re ready to purchase property.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 09/02/2025.
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