Applying for a Self-Employed Mortgage: Here's What You Should Know
Applying for a Self-Employed Mortgage: Here's What You Should Know
Here, your trusted mortgage broker in Canada shares the basics of getting a mortgage if you're self-employed!
Self-employed individuals often have difficulty obtaining a mortgage due to fluctuating or hard-to-prove income. Many business owners are also motivated to expense as much as possible for tax purposes, which lenders often do not consider.
To get a mortgage when you're self-employed, most lenders will require that you include your personal tax Notices of Assessment from the last two to three years with your mortgage application. If you're able to provide this proof of income, you'll usually be able to get the same mortgage products and rates as traditional borrowers. If you can't provide this proof of income, you'll still be able to get a mortgage if you do have a good credit history and can make a minimum down payment of 10%.
Here, your trusted mortgage broker in Canada shares the basics of getting a mortgage if you're self-employed:
Who Are Considered Self-Employed in Canada?
In Canada, self-employment generally refers to any work that you do for profit or gain without the direction or control of another person or organization. This can include running your own business, being a freelance worker, or working in certain professions.
There are different categories of self-employment in Canada. The first is business ownership, which includes sole proprietorships, partnerships, and corporations, and the second is freelance work, including contract work, freelancing, and consulting. Finally, certain professions may be considered self-employment, such as being a real estate agent, an insurance broker, or a taxi driver.
How to Have Better Chances of Getting Approved for a Self-Employed
Mortgage
When you are self-employed, your income can fluctuate from month to month, making it more difficult to prove to a lender that you can make your mortgage payments. In addition, self-employed individuals may have a much harder time qualifying for a mortgage because they may have different types of documentation than an employee would have.
There are a few things that you can do to increase your chances of qualifying for a mortgage as a self-employed individual. First, be sure to keep good records of both your income and expenses. This will help show a mortgage lender that you have a steady income.
In addition, try to build up a good credit history. This will show lenders that you are a responsible borrower. Finally, try to make a sizeable down payment on your home. This will prove to lenders that you are serious about buying a home and have the financial means to do so.
What Self-Employed Canadians Should Prepare When Applying for a
Mortgage
If you're self-employed and thinking of applying for a mortgage, there are some things you'll need to do to prepare:
The first thing you'll need to do is get your financial documents in order. This includes your tax returns, financial statements, and other documentation showing your income and expenses. This is important because self-employed borrowers often have a more complex financial situation than those employed by someone else.
Next, you'll need to calculate your debt-to-income ratio. Lenders use this key factor to determine whether you can afford a mortgage. To calculate your debt-to-income ratio, take your monthly debt payments and divide them by your monthly income.
Once you've done that, you'll need to find a lender willing to work with you. Not all lenders are willing to work with self-employed borrowers, so shopping around is essential. You may also need additional documentation to prove your income and expenses.
Finally, make sure you're prepared to make a larger down payment. Self-employed borrowers often have to make a larger down payment than those employed by someone else. This is because lenders view self-employed borrowers as a higher risk.
THE BOTTOM LINE
If you're a first-time buyer who is self-employed and you're thinking of applying for a mortgage, there are a few things you'll need to do to prepare. By getting your financial documents in order, calculating your debt-to-income ratio, and finding a lender willing to work with you, you can increase your chances of getting approved for a mortgage.
Be guided by a trusted mortgage broker in Canada to make your home-buying experience easier.
Level Up Mortgages is a mortgage broker team focused on helping the self-employed, new immigrants, non-residents, and investors, access best rate and alternative lending in Canada. We have been nominated for best up and coming broker in Canada in 2021 and have been on CTV News and various publications because of our education-first approach to helping you always stay a step ahead of the process. Reach out to us for access to our first-time buyer course or a mortgage strategy session.
See What You Qualify For Or Contact Paul To Get Your Pre-Approval.
Paul Davidescu (www.levelupmortgages.com)
Level Up Mortgages
604-809-3188
paul(at)levelupmortgages.com
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