Self certification mortgages

What are Self Certification Mortgages?

In order to get a mortgage application accepted, the lender needs to know that you will be able to keep up the mortgage payments, so that they are paid back for the large amount of money they have paid out. The way they know this is to find out what your monthly income is, and compare it to your monthly payments. This is why you will hear terms such as "income multiples" where a mortgage company will lend you up to 3.5 times your annual income.

Should you be an employee of a company, you can present pay slips or a reference from your company to prove your income. But should you be self-employed, you will need to provide other ways of proving what your income is. Should you have been in business for three years, you may be able to provide three years accounts, which is what is needed to get a self-employed mortgage. Should you not be able to provide three years accounts, you will need to declare your income.

This is what self-certification is, you declare your income and the lender shouldn't have to look at your account. However, it's not quite that simple. Your lender will also need you to prove your income by providing an accountant's certificate, which is a signed document saying that your income will service the requested loan. You shouldn't be surprised if you need to show business bank statements over a period defined by the lender so that they can look at your gross income.

Should you already be paying into a mortgage, you can provide your mortgage statements to show how reliable you have been in paying off your mortgage. Should you be a tenant, you can ask your landlord to provide you with a reference to show that you have always paid your rent.

You lender will also carry out a credit score on you, which will look at your credit history as well as scoring you on your job and living history. This still provides an input to the mortgage application process, so as well as providing all the above evidence, you will still need to have a good credit rating as well.

The self-certification mortgage is rarely provided for mortgages worth more than 75% of the value of the property, as the lender wants to limit their risks. Therefore, you will need to have savings put away so you can pay that deposit. Some lenders may lend up to 85% of the property on a self-certification loan, but this is rare.

Should you not be able to get a self-certification loan from a mainstream lender, you will have to go to a sub-prime lender. You'll get a mortgage, but it'll be more expensive.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

© AskFinancially.com 2009

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