Getting a mortgage can be daunting. Because of this, it’s critical to understand what to anticipate and how to increase your chances of acceptance. But how do mortgage companies verify your income?.
Gaining an understanding of how mortgage lenders verify your income and what documentation they require is one of the primary obstacles to obtaining a mortgage. Whether you work for yourself or for a company that isn’t your own will determine how you report your income.
This guide contains all the information you need to know about the requirements that lenders have when you apply for a mortgage, including how they verify your income. It also includes links to other helpful guides that can assist you with the application process.
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Employed vs self-employed mortgages
If you work for a company, you probably have a set salary, so you can show proof of your income in the form of paystubs and P60s. Mortgage companies can easily calculate how much of your pay will go towards your monthly mortgage repayments. Mortgage lenders will request to see bank statements, a P60, and recent paystubs—typically three months’ worth—from applicants who are employed.
If youre self-employed, proving your personal income can be slightly trickier. Once you have calculated your taxes, overhead, expenses, and other costs, it may be more difficult to convince a lender that your income will be sufficient to pay the mortgage. Mortgage lenders will request bank statements, SA302 forms (or a summary of the tax year) and two or more years of certified accounts from self-employed applicants.
It’s crucial to remember that a mortgage lender views directors of limited companies as self-employed individuals. Same goes if you’re employed in a Construction Industry Scheme (CIS) job role. In each of these situations, a mortgage broker can advise you on how to provide proof of income.
What credit score do I need to get a mortgage?
It’s a good question, but not one with a simple answer. There is no minimum credit score required to obtain a mortgage because there isn’t a credit score that is universally accepted. Regardless of your credit score, you can still obtain a mortgage, but the harder it is, the lower your score is.
See our guide, “How to Improve Your Credit Score Before Applying for a Mortgage,” for advice on how to raise your credit score before submitting an application for a mortgage.
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