Mortgages for Social Workers

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How To Attain a Mortgage When you are a Social Worker?

One of the biggest misconceptions around social workers is that they are always full-time employees on long-term contracts. Ask any social worker, and they will tell you that their work is anything but standard. This means that when it comes to applying for a mortgage, social workers may have more hoops to jump through than a regular full-time worker. We’re seeing a lot more social workers on short-term contracts, zero hours contracts, agency workers and even self-employed sole traders.

When it comes to applying for a mortgage, this can make the process a lot more complicated. While it would be impossible to offer personalised advice to individuals in this article, what we can do is explain some of the employment types and how this might have an impact on your mortgage application. If you’re a social worker hoping to get on the property ladder, read on to find out how your employment status can impact your application.

We’ll cover the following employment types in this article.
Permanent staff
Short term contracts
Agency workers
Umbrella companies
Sole trader and limited companies
Low deposit and government schemes
Poor credit applicants
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Permanent staff

Anyone on a permanent, full-time contract will typically have no problem securing a mortgage. As long as you are paid the same amount every month and can provide a deposit, you are likely to be accepted by most lenders.

The only situation where this would get complicated is if you have only recently started your job. Some lenders will only consider your application if you have been in full-time employment for more than 12 months.

Others will accept applications from those who have recently started their job, even if they are still in their probationary period. And finally, some will even accept applications from those who are yet to start their new job, provided they have a written contract and a start date within the next three months.

It all depends on the individual lender, so it makes sense to get in touch with a company that knows their way around mortgage providers.

Short term contracts

If your contract stipulates that it is a short-term contract, which is usually defined as anything less than three years, you may find you have fewer mortgage providers to choose from. Most short term contracts, such as maternity leave cover, will last for 3, 6, 9 or 12 months. Mortgage providers may consider that this isn’t enough job security to confidently offer you a mortgage.

Thankfully, there are lenders that will look past your short term contract if any of the following apply to you.
If you have 6 months remaining on your contract, a 10% minimum deposit and a good credit history, OR
If you have 12 months remaining on your contract, a 5% minimum deposit and good credit history, OR
You have a 12-month contract that was previously renewed and a 5% deposit with good credit, or 20% deposit with adverse credit.
Remember that mortgage providers are first and foremost concerned with affordability, so these rules are in place to protect you as much as them. Ideally, you will have a strong credit history and the longer you have been in the same position, the better. If you have adverse credit, you may need to provide a bigger deposit.

Agency workers

The majority of people in the social care sector are agency workers, so this is by far the most common enquiry. In general, agency workers will have a harder time securing mortgages, which is naturally frustrating.

Many agency workers are attracted to higher pay rates, and they might assume that this will make them more attractive to lenders. Unfortunately, lenders only see the temporary nature of agency work and take this as a bad sign.

Mortgage providers like to see a strong and stable salary and regular income. This allows them to make more accurate affordability calculations. The probability of missing mortgage payments when in temporary work is far greater, so lenders tend to steer clear.

So, how does an agency worker go about securing a mortgage? There are a few different criteria that you can meet in order to put a lender’s mind at ease.
If you have been in the same position with the same agency for more than 12 months
If you have a relatively clean credit history, with no late payments in the past 2 years
If you have at least a 5% deposit with good credit and a 20% deposit with poor credit
If you are borrowing no more than 5x your income with good credit and 4x your income with poor credit.

Umbrella companies

Working for an umbrella company is also incredibly common for social workers. In this instance, the umbrella company holds the contract with the employer and the social worker holds the contract with the umbrella company. Mortgage providers see this as a less secure type of work contract and are less likely to grant mortgages to borrowers in this situation.

To make things more difficult, if you are also responsible for your tax and national insurance contributions, you may also need to provide 3 years of accounting history. Some lenders are more flexible and may only ask for 12 months of accounts, so it’s worth shopping around – or working with a specialist broker.

Sole trader and limited companies

In some situations, you may be able to trade as a self-employed social worker. If this is the case, you will need to follow the same rules as any other self-employed worker looking for a mortgage. You can read more about self-employed mortgages and what is required by lenders here.

Most lenders will ask to see trading history for the past 3 years and they will make a decision based on your net profit if you are a sole trader, and your salary and dividends if you are a limited company. Some lenders are more flexible than this and may only ask to see one year of accounts, or even less if you have an accountant. In most cases, lenders will
Make a decision based on 12 months of trading history
Lend with a deposit as lows as 5%
Lend based on the share of profits from a limited company, rather than just looking at salary and dividends
Make a decision to lend to someone with adverse credit.

Low deposit and government schemes

While there are no schemes available specific to social workers, social workers are welcome to make use of the two main government schemes available if this is your first home. These are the help-to-buy scheme and the help-to-buy ISA. The former allows individuals buying their first home to apply with a 5% deposit. The latter is a savings account designed to boost your deposit value. For every £200 you put in the account, the government will top this up by £50. The minimum payout is £400 while the maximum is £3000. This can be a huge source of help for those hoping to get on the property ladder for the first time.

Poor credit applicants

Poor credit or a lack of credit history is one of the main issues facing mortgage applicants. Lenders will try to look at the whole picture, so if your poor credit is the only bad mark against you, this might not be as much of an issue. However, if you have poor credit, a low deposit and irregular income, this can make it far more difficult to get accepted for a mortgage.

In many ways, the best thing you can do is to speak to a specialist mortgage broker who will be able to match you with the lenders more likely to accept your application.

Next steps

If you’re ready to start the house hunt and get on the property ladder, submit an enquiry today to find out how we can help you increase your chances of being accepted for a social worker mortgage.

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