First Time Buyer Contractor
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First Time Buyer Contractor
James Best & Richard Grigg explains how the mortgage process works if you are a contractor and First Time Buyer.Is it harder to get a mortgage as a contractor and First Time Buyer?
James: It’s no harder for a First Time Buyer contractor than for any other First Time Buyer. The main challenge with mortgages for a First Time Buyer is that there’s no mortgage credit history, because you’ve never had one before.
That’s pretty much the only thing that holds you back compared to a non-First Time Buyer. There aren’t any specific things as a contractor that make it more difficult. Actually, there are some advantages, which we’ll come on to later.
Richard: A contractor is a very broad description and there are many different contractors in the workplace. Some lenders treat them all exactly the same, while others lenders treat them differently.
The crucial thing, though, is to reassure anyone on any kind of contract – because with the right support, getting a mortgage should be no more difficult than for anybody else.
How long do you have to be a contractor to get a mortgage?
James: This is a really important question from First Time Buyers – and next time buyers – who are contractors.
The answer can vary wildly depending on which lenders you’re looking at, so it’s important to get the right advice. Some lenders require 12 months worth of contract history, while others rely on your experience within the same industry.
Depending on the type of work you’re doing, the type of contract that you have and the industry, some lenders may not require any history. A mortgage expert, ideally one that’s whole-of-market, will help you understand your circumstances and give you the tailored advice you need.
Richard: The most common contractors we see are Construction Industry Scheme (CIS) contractors. These are typically tradespeople who are paid at the end of each month by the contractor they’re working for. That company will pay 20% tax to HMRC as shown on their payslips.
At the end of the year, CIS contractors submit a tax return for their expenses, but the bulk of their taxes is paid. In most cases they will get a rebate.
We’ve had mortgages agreed for CIS contractors who have only been on CIS contracts for a couple of months, if they’ve had experience in the field. If you’re a brand new, day one CIS contractor with no previous experience, you’ll need a bit more time in the field to show a consistent income.
A different type is a day rate contractor. They’ll be contracted with an employer for a period of time. I’ve had day rate contracts agreed on day one, as soon as they’ve started that job.
Some lenders, for the right client, would agree to a mortgage before they’ve even started, once the contract’s signed. Sometimes that’s helpful for day rate contractors working far from home, who need to buy a property to facilitate the new employment.
We see a lot of fixed-term contractors, too, including teachers on a contract for 12 months at a time rather than in permanent employment. For those, the arrangements are similar to CIS contractors.
We need a little bit of experience, especially if it’s your first contract, but if you’ve been teaching for several years already we can potentially arrange that on day one. It would depend on how the contract’s laid out, whether it’s hourly, monthly or different terms.
The final type we see quite often is zero hours contractors. With these, lenders usually want more records, to show a pattern of income coming through. In most cases you are looking at a 12 month minimum for a zero hours contract.
That may not apply if your zero hours contract is running alongside another role. We see that a lot with NHS staff doing bank work. Bank work is on a zero hours basis, but it’s fairly consistent. There’s definitely more flexibility with that, so you could have a shorter period of time there.
How much can I borrow for a mortgage if I’m a contractor and a First Time Buyer?
James: In most instances, you’d have the same borrowing limits as someone who’s employed or self-employed. You’re not at a disadvantage just because you’re a contractor and a First Time Buyer.
As we’re recording today in March 2025, quite a few mortgage lenders will lend more to a First Time Buyer compared to someone else on the same income. That would still apply if you are a subcontractor or a contractor – so if anything, there is an opportunity for you to borrow more.
Richard: It very much depends on what you’re earning and which kind of contractor you are. You could potentially borrow significantly more than your PAYE equivalent would allow.
CIS is a good example. Many lenders will use your standard self-employed net profit figure from your tax returns as a sole trader. They might average one or two years’ figures and use that to calculate your borrowing.
However, a selection of lenders will use the gross pay on your CIS contract. That can have a huge impact on how much you can borrow and can really open up housing options for you. We can use the gross income to push that out further.
Similarly, with day rate contractors, certain lenders will take an easier interpretation of your earnings. Rather than needing to see what’s landed on your tax return, they look at the gross day rate multiplied up for the year, allowing for holiday – as even the best people aren’t working 52 weeks of the year. Again, it helps push that borrowing capacity a little further.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
How is a mortgage calculated for a contractor that is a First Time Buyer in the UK?
James: Mortgage lenders will look at the same credit score and credit reference information as for any other mortgage applicant.
Their underwriting teams will then look at your work history and experience in the sector, plus the type of work. They also look at how long your current contract has been running and how long is left on it.
Some contractors are paid on a day rate basis, which is more common in certain fields. The type of contract you’ve got will influence how the lender will interpret your income. It’s not a one-size-fits-all.
Richard: The key thing here is to have a chat with a broker. Good brokers will know which lenders will take your particular contract into consideration and apply the most beneficial rules to you. We’ll make sure you get any extra borrowing you need for the property you want.
But the other really crucial thing is that you might not need to be bogged down with specialist elements. You may get a better deal by using a standard lender. If you can borrow what you need based on your self-employed accounts, there’s no reason to chase down a CIS lender for extra capacity.
What documents do I need to apply for as a contractor and a First Time Buyer?
James: With this particular type of mortgage, preparation is key. If I were a First Time Buyer contractor, I would provide a copy of my signed current contract. If it’s up for renewal in the near future, or I’ve got another one due to start, I would get a copy of that contract as well.
I would also demonstrate my experience within the same field of work, with previous contracts or at least information about those. If perhaps I had been employed before doing subcontracting work, I’d have details of the previous employer, and ideally an old P60.
It’s more about your work history over the last few years, as contracting isn’t an open-ended, permanent situation and usually you will have regular, rolling contracts. Lenders just need a bit more information to consider you for a mortgage.
Richard: Have a chat with a broker first – because the type of contractor you are will have a big impact. Broadly, though, if you’re CIS, we’d be looking at three, six or 12 months’ worth of pay slips. Otherwise, it’s the last two years’ self-employment tax returns.
For day rate contractors, we need contracts and pay slips, and your contracting history can be really helpful. Depending on how long you’ve been doing it, we may need previous contracts, or previous employment details if you’re new to contracting.
For zero hours contracts, we will be looking at payslips and P60s, typically.
What if I have bad credit as a contractor looking at my first mortgage?
James:There’s no difference in how lenders look at your credit history. Whether you’re a contractor or not, it would be viewed the same. If you’ve had blips on your credit file, get copies of your full credit report so you can review and talk it through with your advisor.
We’ll get an understanding of what happened and all of the details on that report. There are many different lenders that will consider applicants with bad credit. It’s just an additional piece of paperwork to provide, and it always helps to check your credit report and get a copy.
Richard: Honestly, it makes no difference whatsoever. I’ve got plenty of specialist lenders for people who’ve had previous credit issues, and as with the rest of the market, they have niches around assessing contractor income.
It would be absolutely no different from a standard employed or self-employed person with previous credit issues.
Can I get a Buy to Let mortgage as a First Time Buyer contractor?
James:Yes, you can get a Buy to Let as a First Time Buyer and as a contractor. Your options are a lot more limited, however, as only a few lenders will consider it.
Buy to Let is not that common for First Time Buyers, but ultimately, if this is what you’re looking to do, you certainly can be considered.
Richard: I’ve never seen a case where the contracting element was an issue for a Buy to Let. These mortgages are typically for investment properties, and they’re self satisfying. They are based on the rent covering the mortgage every month.
Some lenders need to see that you’re not reliant on that rental income and you have your own earnings to support it. That’s all they’re looking to see – where that income comes from isn’t a massive factor.
How can I improve my chances of getting a mortgage as a contractor and First Time Buyer?
James: Again, it’s about being organised in showing your current, future and past working history. Also, with the fluid nature of contracts where one could finish, you’re starting a new one or things are due to change, it’s well worth having a conversation with an experienced mortgage broker.
There may be different mortgage options as a result, or things you may need to do in addition to the standard paperwork. So just get in touch and make sure we’re all on the same page with regards to what you’re doing.
Richard: Speak to your broker nice and early. If you’re on a fixed-term contract that’s just about to come to an end, make sure that contract’s being renewed. You can have that conversation with a broker early on, and we’ll have plenty of time.
That’s better than having a contract that ends next month while trying to get a mortgage agreed. All lenders are looking for a degree of reassurance that the income will continue long term.
It’s the same with CIS contractors. It helps to have an early understanding of how that income looks as we go into the November-December period, for example, when payslips are likely to be lighter as less work is available and there are fewer daylight hours.
We can plan for that, by approaching a lender that takes a broader view – looking at 12 months rather than those three payslips, if they don’t accurately reflect your standard working income.
If you’re a zero hours contractor, we can again plan ahead to apply for the mortgage at the right time for your hours – perhaps your work is seasonal, or you’re about to get your next P60.
Going back to what I said about sometimes not needing that contractor specialism, if someone submits their next set of self-employed accounts straight after the tax deadline in April, the new set of accounts could be looking much better. We may then get a better mortgage rate.
So plan ahead and have that conversation with your broker. I’ve got no issue in having a chat with clients 12 months ahead, to make sure we can set things up in the right way. Then, when they’re ready, they’ve got everything they need to go ahead.
How do I apply for a mortgage as a contractor and First Time Buyer?
James: Get in touch with a reputable mortgage broker. We deal with these types of cases all the time. These aren’t ‘vanilla’ cases, as banks call them, where we would just need three months’ payslips and bank statements.
A lender’s understanding of your situation may not be strong enough for them to offer you the right mortgage for your circumstances.
Given that we’re experts in our field, we deal with a lot more self-employed and contractor cases. We’ve had situations where a client has been rejected by their own bank, but we’ve been able to get the client what they wanted.
It’s all about our awareness and understanding of your circumstances. So just get in touch. We’ll talk you through everything and help you out.
Richard: Preparation is key. Talk to your broker to get a good idea of what’s going on. On the high street, banks aren’t shouting about how they assess contractor income. That’s a particular specialism of the broker space – we know who does what.
Trying to do this without a broker is difficult – it would just be pot luck to sit with the right lender at the right time. We’ll look at whether you need that extra borrowing, or if a more standard route might potentially get you a better interest rate. So have a chat and see what’s possible.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let mortgages.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.