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Mortgages for Self Employed

Getting approved for a mortgage as a self-employed individual has gotten significantly harder over the past few years. This is specifically true if you have a lot of write-offs against your income. It is however not impossible to still get a mortgage from a bank.

There are three scenarios that exists for a self-employed individuals. Before we get into details we want to clarify who is considered self-employed under current guidelines:

  • Individual person who files taxes as self-employed
  • Individual with a business license
  • Individual or group of individuals who have incorporated and conduct business under the company (even if they receive a salary from the company)

Mortgages for Self Employed:

First Scenario | Verifiable Income Program

Under this program income used for qualification purposes must be verified by government documentation. In this case the lenders finance you with the the following requirements:

  • Minimum 5% down-payment (Insured)
  • 20% down-payment (Uninsured)
  • Client must be in business for minimum of 2 years
  • Last 2 years of Notice of Assessments
  • Full T1 Generals
  • The lenders will use 2 year average income based on line 150).
  • Some lenders will allow to gross up the income by 15% or certain add-backs from expenses on T1 Generals (This is not allowed for incorporated individuals)
  • Clients must have excellent credit

Second Scenario | Stated Income Program

If you are incorporated or have a lot of write-offs and need to use more income than what is shown on your Notice of Assessment, you can be qualified under the “Stated Income” program where higher down-payment is needed to be considered. Here we have 3 options for qualification:

  • 10% – 34% down-payment (Insured)
  • Client must be in business for minimum of 2 years
  • Under this option the lenders will consider reviewing T1 generals (for a sole proprietor) and adding back expenses which are considered “soft-cost”
  • For incorporated companies, most lenders will consider reviewing corporate financials in order to accept higher income for qualification
  • Client must have excellent credit
  • 35% down-payment (Uninsured)
  • Client must be in business for minimum of 2 years
  • Under this option most lenders will not need the client to pay high-ratio mortgage insurance
  • For sole proprietor, most lenders will consider using gross business income for qualification
  • For incorporated companies, lenders will consider reviewing corporate financials in order to accept higher income for qualification
  • Client needs to have decent credit history

Third Scenario | Alternative Lending program

The guidelines for this program are simple. The qualification for this type of mortgage is based on property and down-payment. In most cases there is no income documentation required.

  • 20% down-payment
  • Client must be in business for minimum of 6 months
  • 6 month cash flow/bank statements required to show ability to make payments
  • Credit is not a concern
  • Higher rates and lender fees will apply
  • 25% down-payment
  • No Income verification or proof of self-employment required
  • Credit is not a concern
  • Higher rates and lender fees will apply

As you can see being self-employed does not disqualify you from getting a mortgage. The mortgage lending guidelines are changing all the time and we are always staying updated, so if you have a question or a unique situation, give a call today 1-855-881-1010 and we will be happy to assist you and getting you Approved.