Homeownership is a goal that many people share. However, with rising property costs, stagnant wages and the disappearance of 100% mortgages, it’s becoming a distant dream for many. There is a misconception that lenders will only want to lend to one type of worker. And if you’re a contract worker, you don’t fit the mould.
Contract workers might struggle to secure a mortgage because their income might be irregular. They might move between fixed-term contracts and this can make lenders nervous. While you might have a regular and steady income now, what happens if your contract ends and you can’t find another contract? What will happen to the mortgage repayments?
In reality, contract workers often know that they will have another contract lined up. In many cases, you will start a new contract with the same company. So, how do you go about convincing a mortgage provider that you are a safe bet? Read on to discover the truth about contract workers and mortgages.
Employment is only one part of the picture
The first thing you need to know is that your employment status is only one part of the lending picture. Every mortgage provider will want to look at a number of factors. And they won’t instantly write you off if you are a contract worker. Instead, they will look at things like your income, deposit, work history and credit history to decide if they should offer you a mortgage.
While contract work might lead some lenders to turn you away, there are some lenders who are more up-to-date with the latest working trends. They recognise that not everyone fits into a neat box, and that “careers for life” are very much a thing of the past. If you shop around, you’ll find some lenders more than willing to offer mortgages for agency workers and contract workers.
How’s your credit history?
In addition to your employment history, lenders will also want to see that you have been responsible with credit in the past. However, even a few marks on your record won’t instantly prevent you from getting a mortgage. Again, your credit score is only one part of the picture and some lenders are more than willing to work with those with bad credit, provided they have made steps to improve.
Do you have a healthy deposit?
If you are an agency or contract worker on a low income with poor credit a small deposit, you might struggle to get a mortgage. If you can improve your credit score and then save for a larger deposit, you will have a better chance of securing a better deal. While mortgages with a 5% deposit are available with things like the Help to Buy scheme, you’ll have access to better rates if you can secure a larger deposit. Things like Shared Ownership can also help you to get on the property ladder with a smaller deposit.
Shop around for the best deal
Before you make a decision, you should always shop around for the best deal. Many people default to their own bank as they assume that they will offer them the best deal, however, you’ll soon discover that there are few benefits to being loyal in this situation. And you don’t have to stick to the well-known high street brands, either. In many cases, you’ll have better luck with the smaller, niche mortgage providers.
How to find your ideal lender
If you’ve been turned down for a contract worker mortgage in the past, don’t worry. This doesn’t mean that all lenders will turn you away, it just means that you need to keep looking. The best place to start is with a specialist mortgage broker. They will be able to look at your situation and read between the lines of your credit report. Essentially, they will be able to see what lenders can see. This will help you to get a better idea of what will make you more attractive to lenders and which lenders are most likely to accept your application.
Remember, if you are willing to put in the work by tidying up your credit score and saving for a larger deposit, you shouldn’t let your work status hold you back. It is possible to get a mortgage with contract work, you just need to know where to look.
Did you like this post? Why not Pin it?
Featured article