Those who have a keen interest in the future of self certified mortgages may have noticed that they are beginning to appear more and more frequently in the media. Self certified mortgages – which enable the borrower to certify their income without needing to supply standard income documentation – may be extremely popular with the self employed but they are also a cause for concern for the regulatory bodies.

While lenders usually need proof of income, sometimes people may have difficulty proving how much income they make. Perhaps they are self-employed or have not been trading long enough to produce any accounts; maybe they have more than one job or rely on large bonuses or commissions as part of their total income. Contract workers, freelancers, unsalaried company directors, or low wage earners with higher assets would all have problems in providing income records. These people need to consider self certified mortgages.

If you have determined that self certified mortgages are the best choice for you, how do you avoid getting in over your head? The first step is to be brutally honest when reporting your income. Do not use numbers that are overly optimistic; if anything, choose numbers that are conservatively pessimistic. Never count on something that has not happened yet. If your bonus normally increases 2% each year, there is no reason to expect it to increase 10% this year.

If you have concerns about relying on a certain level of projected income, and then falling short, discuss it with your lender. Too many people attempting to secure self-certified loans mistakenly believe they must bluff their lender by misstating the facts, and this is not true. In fact, the lender is your ally. They want to lend you money because in the end that is how they make their money. They simply do not want to foreclose on you. If there is a reason for concern, they want to know. They have more experience with loans than you do, so discuss your concerns with them and take their feedback into consideration.

Traditional mortgage loans may be out of reach for many people who will not qualify because of their employment situation. While the typical 40 hour work week, fixed paycheck job where you get paid twice each month is still widely available, there are a growing number of jobs that rely heavily on commissions or bonuses as part of the pay structure. Additionally, for people that own their own business or professionals who earn their income from freelance projects, a traditional mortgage can be difficult to qualify for.

If you are interested in applying for a self certified mortgage, then your lender will need to gleam as much financial information from you as possible. The more information that you are able to provide the more likely that you are to obtain a good deal and mortgage rate.

Self certified mortgage means that you self certify that you can make payments on your mortgage and because of this, there is often a higher rate applied as you are seen as a larger risk to lenders than someone who can substantiate their income.

If you have concerns about relying on a certain level of projected income, and then falling short, discuss it with your lender. Too many people attempting to secure self certified mortgage mistakenly believe they must bluff their lender by misstating the facts, and this is not true. In fact, the lender is your ally. They want to lend you money because in the end that is how they make their money. They simply do not want to foreclose on you. If there is a reason for concern, they want to know. They have more experience with loans than you do, so discuss your concerns with them and take their feedback into consideration.

The market for self certification mortgages is expanding rapidly along with the rest of the non-conforming lending market. This is mainly due to a rise in the number of self-employed people in the workforce. It is estimated that around one quarter of the workforce is now self-employed and the number is growing.

Such individuals usually earn enough money to apply for a mortgage, however many do not possess the strict accounting records required to apply through a mainstream lender who will require full proof of income. This is either because they have little need for preparing such accounts or their accounts show a smaller income than they actually make. This most common reason for this is that their incomes may be mitigated for taxation purposes.

The lender has stated that they are only removing their self-cert products from the market temporarily. The financier also states that another reason for the move is that they have been subjected to a sharp spike in the number of applications for their self certification mortgages. This means that they must reel back the product for a while so they don’t overexpose their loan book to a single product.

The brokers believe that the lenders need to take more responsibility for their lending criteria and stop passing the blame on to everyone else. Brokers argue that denying responsibility for fraud with self certification mortgages is similar to handing someone a loaded gun to rob a bank and then pretending it wasn’t their fault the bank was robbed. Because of the lax lending criteria regarding self-cert products they have been blamed by some analysts as one of the main contributing factors for the credit crunch. Whatever the case, the FSA has now heard first hand from industry insiders that self-certification mortgages need a shake-up.