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Self Employed Mortgages
If you are self-employed and applying for a mortgage through a traditional lender, you may be experiencing difficulty getting approved because of stricter lending rules.
Over the years, traditional lenders have imposed increasingly strict rules on loans and banks have tightened their mortgage requirements for self-employed entrepreneurs with no reportable income.
Orchid Financing has professional mortgage brokers and agents standing by who can provide the helping hand you need to get a mortgage reserved and secured without having you pay a huge tax payment to Canada Revenue Agency.
Stated Income mortgage would serve the situation best where self-employed income is being used.
A stated income mortgage can be used by a self-employed borrower as a first mortgage for the purchase or refinance of a home, or as a second or third mortgage to consolidate debt like credit cards.
Lenders who accept stated income mortgages will accept methods of proving income that may not have been properly declared on an applicant’s tax returns. If you can show business contracts with customers, banking statements that show additional cash going into your personal or business bank account, internal financial statements, financial plan, internal accounting records, and other forms of income verification that most banks would not consider.
Orchid Financing has access to over 40 national and local lenders across Canada, including major banks, alternative mortgage lenders, and private mortgage lenders. This means you can get the mortgage that best fits your needs without having to travel far.
Our customers have trusted us for years, and now it’s your turn! Contact us today for more information or to apply for a mortgage.
We provide a range of mortgage products to fit your individual needs.
At Orchid Financing, we offer a range of solutions for all your home mortgage needs. Whether you’re looking to buy a new home or refinance an existing one, we’ll help you find the loan that works best for you.
What you should know about financing a home with a self-employed income.
How does a lender calculate the income of a self-employed borrower?
In calculating a borrower’s income, most banks and other conventional lenders take into account the average of the most recent two years of income declared on line 150 of the borrower’s two most recent tax returns. In some cases, lenders that accept stated-income mortgage applications will consider the average of the last 2 years of gross income before tax write-offs. In certain instances, they will also accept other sources of income, including income from side jobs like Uber driving income and cash income.
When applying for a loan, it is important to consider how a lender will view your credit history and credit score. If you have high outstanding debts or balances on your credit cards, you should plan on paying them down as much as possible before applying for the loan. A lender can view high outstanding debts as an increased risk to their investment.
The ability to write off legitimate business expenses, such as business travel, business legal expenses, corporate education, and business meals can save money on the amount of income tax you pay. However, when applying for a mortgage or loan through a bank, this will limit the size of mortgage or loan that you can qualify for and the interest rate that a bank might give you.
Are mortgages more difficult to obtain if you are self-employed?
Being self-employed can make getting a mortgage more difficult than it is for salaried or hourly full-time employees. Most lenders require a borrower to submit documentation detailing their income, net worth, credit score, and much more. Self employed individuals do not get a T4 outlining their annual income so they must provide the lender with a Stated Income Application that most of the conventional banks will not accept. Although a lender cannot exactly calculate and verify to 100% certainty the income of a stated income mortgage application, the more proof you can provide the better your odds are of getting approved for a great rate.
How do self-employed people qualify for mortgages?
Listed below are some of the documents that might be required to be considered:
- Income tax returns for the past 1 to 2 years may be required
- Proof that your personal taxes are paid and up to date by looking at the taxes owing portion of your Notice of Assessment
- Statements outlining your business finances (income, expenses, debt, etc.)
- Bank statements outlining additional money going into your bank accounts
- Copy of the business license or articles of incorporation
- Any contracts demonstrating future income
- A credit check may or may not be required depending on the lender
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FREQUENTLY ASKED QUESTIONS
FAQ
There is no fixed time limit for being self-employed before you can qualify for a self-employed mortgage. You will need to prove your income for at least the past two years.