Calgary Inner City Blog

How Do You Get A Mortgage When Self-Employed?

Being self-employed can sometimes make securing a mortgage trickier, but it’s certainly not impossible.

The main reason isn’t what you do for a living or the fact that you’re self-employed; it is generally the lack income proof and/or all those expenses your accountant used to ensure your “net” earnings were super low (to pay as little income tax as possible).

It’s not any more difficult to get a mortgage when you’re self-employed. The basic rules still apply for getting a mortgage based on debt servicing ratios & credit score requirements.

However, if you don’t declare your “real” income, then you will face different conditions to qualify.

There are two basic methods that applicants can show income: The first is ‘third-party verified income,’ and the second is ‘stated income.’ Verified income is provable. It is usually an average of your last two income tax returns (line 150 to be exact). If you have been self-employed for a certain length of time and have a down payment 20% or better, you may be able to use stated income. This is reasonable income based on the type and size of your business or taken from deposits to your bank account.

Being accountable and organized is key for any self-employed applicant!

If you are self-employed and looking to qualify for financing, here are a few things to consider:

  1. Always keep your personal tax returns up-to- date and filed on time.
  2. Pay all income tax owing on time.
  3. Keep your credit score high (as a self-employed applicant many lenders expect a better than average credit score from you).
  4. Many banks are now offering mortgages specifically geared towards self-employed individuals.
  5. The higher the down payment, the better the chances of getting approved for a mortgage.
  6. Self-employment can often times result in severe income level fluctuations from month-to-month, so if you don’t already have an emergency fund, consider building one before you try to qualify for a mortgage.
  7. If points 1, 2 and 3 aren’t doable … then I can likely still get you a mortgage (albeit at a slightly higher interest rate).

Call Candace at Countryside Financial 403-949- 4129 or info@countrysidefinancial.ca to assist with your new mortgage!

May 11, 2016
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