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Are you Self-Employed? Need a Mortgage?

Need a Mortgage? But you are Self-Employed?

What you need to know if you are Self Employed and want to qualify for a mortgage to buy a home.

If you are self-employed or a business owner, you may be surprised to find that getting a mortgage, without the conventional documents, is not a simple process.
 In the past 3 years mortgage rules have been tightened numerous times.  As a result mortgage borrowers are not only required to supply more documents than before but the criteria to qualify for a mortgage has increased.  This is especially the case for those who have their own businesses and don’t have the typical documentation required.

Lenders will require:

  • 2 years proof of being self employed – business license, T1 Generals, GST registration document, if you are incorporated the lender will require a copy of your certificate of incorporation and articles, and potentially 2 years unaudited business financials prepared by an accountant.
  • For alternative financing lenders will look at invoices, 6-12 months bank statements, and other alternative forms of proof of income/cash flow.
  • Lenders may also request proof of net worth if application, bank statements showing at least 2 years of mortgage payments in liquid assets.

Here are some items you need to have or be aware of when you apply for a mortgage.

  • CRA Notices of Assessment – These are generally used to determine what your income has been over the last 2 to 3 years.
  • Proof of Business for Self for 2 years – Business Licenses, Certificate of Incorporation and Articles, GST returns, T1 Generals showing business income, etc
  • Down Payment – Sometimes Self-Employed applicants require a min of 10% down payment and up to 35% down for stated income deals with no client premiums.
  • Good Credit – You can keep your credit score healthy by paying bills on time and minimizing your number of loans and credit cards.
  • On time tax filing – Ensuring that your tax returns are filed on time and that taxes owning are paid will help create a positive picture of your finances. Personal and business taxes.
  • Mortgage Insurance – for the self-employed or business owners, the mortgage insurance rates at which you will qualify will vary several percentage points between those who have proof of income and those without.
  • Seek Advice – Getting a mortgage is a complicated process.  Work with a mortgage professional to ensure you get a great mortgage product.

Credit scores also affect your borrowing power. Credit scores above 680 are ideal, scores between 621 and 650 are ok, but not ideal and can limit your borrowing power. Lenders will look at your credit bureaus to ensure you have no late payments, especially missed mortgage payments as well as no collection items and bankruptcy has not been declared.

As a mortgage professional, I help clients every day to get a mortgage they can afford and at great rates.  If you are unsure whether you can prove your income, talk to me and I can help simplify the process and explain everything you need to know.  Don’t hesitate to contact me for a meeting. laura@cleverlending.com or visit my website www.cleverlending.com for more info.