Qualifying for a Mortgage as Self-Employed 

Lending standards for self-employed are challenging, but I’m here to help

I always set reasonable expectations and am completely honest with clients. Most banks and lenders require a minimum two-year track record of earnings. As I mentioned above, these tax returns may not reflect your actual take-home income. There are lenders that I work with that will consider less than a two-year history of income, but once again, they may come with a higher mortgage rate and possibly restricted terms.

As a self-employed person, you should be writing off a number of expenses to lower your net income for tax purposes. For mortgage applications, however, this is not ideal. Lenders calculate your debt-to-income ratio – a measure of how much of your income is used to service your debts – using net income after expenses. Because you might be deducting a lot of expenses and showing a lower net income, your debt service ratios will not be as appealing to lenders. That’s where it becomes challenging because lenders prefer standard debt-to-income ratios of approximately 35 – 44 per cent.

Mortgage Calculators

Use these tools to determine if you finances are going to meet your future goals.
Mortgage Calculator Use this calculator to generate an amortization schedule for your mortgage. Quickly see how much various loan amounts will cost you monthly.
Mortgage Payoff Calculator How much interest can you save by increasing your mortgage payment? This financial calculator helps you find out.
Compare Mortgages Calculator Determining which mortgage provides you with the best value involves more than simply comparing monthly payments. Use this calculator to sort through the monthly payments, fees and other costs associated with getting a mortgage.
Mortgage Refinance Calculator How much interest can you save if you refinance your mortgage? This calculator helps you find out! Enter the specifics about your current mortgage, along with new loan amortization, rate and closing costs. We will then determine how much interest refinancing can save you.
Mortgage Qualifier  The first steps in buying a house are ensuring you can afford to pay at least 5% of the purchase price of the home as a down payment and determining your budget. This calculator steps you through the process of finding out how much you can borrow.
Rent vs Buy  Should you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question.

If you would prefer to go over your finances together, I would be happy to book an appointment with you.

Mortgage rates

Period Interest Rate
CLOSED RATES
6 Months 3.34 %
1 Year 3.14 %
2 Years 3.14 %
3 Years 2.92 %
4 Years 3.14 %
5 Years 2.97 %
7 Years 4.24 %
10 Years 4.39 %
OPEN RATES
ARM/VRM P+/- 0 %
6 Months 6.7 %
1 Year 4.45 %
 

Call me for today’s unpublished rate specials!

Mortgage Application PDF
Online Mortgage Application

TOP

What you need to know

You may end up paying more for the mortgage

Lenders may view you as a higher-risk borrower which means you pay a little extra to secure a mortgage.

Posted interested rates vary quite a bit between lenders, however, the interest rate you will qualify for may be a little higher. But, is it worth it? Absolutely! Here’s why… many of my self-employed clients show very little income on paper. This means we need to secure your loan utilizing certain mortgage products such as “stated income”. This means the interest rate is often slightly higher than if you declared more income, or had a T4 filed. However, when you calculate the extra interest cost of the higher mortgage rate, and compared to the alternative, it’s quite worth it! What is the alternative you ask? Simply declaring more income on your tax returns, and therefore paying more income tax!

“Qualifying for a higher interest mortgage is preferable to paying more income tax when you are self-employed.”

The increased income tax you pay is much more than the small increase in interest rate with a “stated income” mortgage product. With that said, if you declare enough income, you can often secure the same great mortgage rates and terms that a client that files a T4 is able to qualify for.

The lender will require more documents

As counter intuitive as that might seem, the actual mortgage application process for self-employed and T4 employees is quite similar. You are going to get an interest rate quote, fill out a mortgage application, sign paperwork and provide supporting documentation.

The documentation requirements, however, is a different story. While employed applicants need to provide a few supporting documents (T4s and payment stubs) as proof of income, self-employed clients are required to show a bit more documentation. These include financial statements prepared by a certified accountant, CRA Notices of Assessment and T1 and/or T2 Generals to name a few. The documentation requirements will also change based on if you are a sole proprietorship or a corporation. I can help guide you in collecting and verifying all these documents.

TOP

How we can work together to get your self-employed mortgage application approved

It might seem overwhelming at first, but I’m here to help. In my network, I have lenders that specifically want to help the self-employed secure new mortgages.
Here are some tips to help you score a great mortgage as a self-employed person.

1. Planning ahead
Lets meet and discuss your situation well before you are ready to secure a mortgage. We can look at your debt, expenses and business growth. How much income do you plan to declare and what are some major write-offs?  Some underwriters will allow you to put certain expenses back into your income. All of these factors will influence which mortgage product is best for you.

2. Keep a good credit score
It is very important to maintain a high credit score. There are many mortgage products that are only available to those with credit scores above a certain benchmark. Some websites give you free access to view your credit score so ensure to monitor yours at least twice a year.  There may also be circumstances where your credit report has a small ding in it, something that has been corrected but lingers. Keep all the documentation and details of the event in your files.

3. Be organized
Keep your financial statements, tax returns, T1 Generals, CRA Notices of Assessment, etc, as organized and accessible as you can. Having your documents in order and available to the lender helps instill confidence, expedite the application and secures more favourable rates and terms.

Documents you will need as Self-Employed:

  • Government issued Photo ID
  • The last 2 years of Notice of Assessments
  • The last 2 years Full T1 Generals
  • If you are claiming the company as an asset then company financials might be required.
  • Proof of other sources of income, if any
  • All assets – Recent statements from bank accounts or investment accounts
  • All liabilities – Recent statements for any credit cards, loans, etc.
  • Down payment amount source

TOP

Jaret really worked hard to present our story to a lender and get us approved. Coming to our house was also very convenient as we have young children.

Cindy and Joel

I took Jaret’s advice to let him look into a better renewal rate than the one that was automatically mailed to me by my lender. He found a better offer, and I’m much happier.

M. Long

Thank you for helping me get into my first investment rental property.

Trevor

GET IN TOUCH

I would love to hear from you! Let me know what what services you are interested in or if you just want to have a chat about your current financial circumstances. I’m here to listen and then give you my professional feedback.

If you have any immediate questions about my services, feel free to give me a call at 604-816-5988 or send me an email! Prefer to schedule a call ? Add yourself to my calendar on a date and time that works best for you.

Fields marked with an * are required