Mortgage for Self-Employed
Nearly 20% of earners in Canada are self-employed, yet it is still difficult for this growing demographic to obtain a mortgage. The largest most significant obstacle is that income is not always easy for the buyer to prove. This is due to many business owners expensing as much as possible through their companies in order to minimize their payable taxes. Often a result of this, is the clients declared income is not an accurate projection to their actual earnings.
When applying for a self-employed mortgage lenders require the clients two most recent notices of assessment. If the client can provide proof of income, they generally have access to the same mortgage products and rates as traditional borrowers. When the declared income itself is insufficient, some lenders will qualify self-employed borrowers using their financial statements and articles of incorporation in addition to the notices of assessments.
There are three different types of income verification:
- Traditional income verification: Clients employment income is verifiable through their tax returns
- Nontraditional income verification: Looking at the clients business’ financial statements and bank statements to prove actual income
- Stated income: The client is not able to verify your income
Mortgages with traditional income verification will always have the lowest mortgage rates and down payment requirements because they’re the least risky. Nontraditional income verification will come in slightly higher and may also require mortgage default insurance. Stated income will have the highest mortgage rates of all three options with much larger down payment requirements and property restrictions.
As a self-employed person, it can be challenging to navigate which lenders specialize in these types of mortgages, which is why it is advantageous to use a mortgage broker. Rare Mortgage Lending Co. has access to over 50 lenders and has a broad knowledge of the mortgage market. It would be our pleasure to connect you with the most suited lender.