Sarah Colucci's Mortgage Blog
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You may wonder if obtaining a mortgage in Canada without income is possible. Perhaps you are self-employed or unemployed or receiving pension income like Canada Pension Plan (CPP) or Old Age Security (OAS).
Many different mortgage programs can help you purchase property, but qualifying will depend on a few factors.
Let's look at the different employment types, including unemployment and other factors like credit scoring and available down payment or equity in an existing property (if you're already a homeowner).
SELF-EMPLOYED AND GETTING A MORTGAGE
If you're self-employed, it's possible to get mortgage financing. To get a mortgage with a major bank, credit union or "mono-line" lender (a prime lender without a storefront), you must have been in business for at least two years, and you must have claimed enough income on your last two years of taxes to qualify. Prime lenders usually do not have "stated income" programs that solely rely on the "reasonability" of income or bank statements. Therefore, you will have to claim enough income to qualify.
If this doesn't apply to you, you can still try other options. It's not unusual for self-employed borrowers to claim very little on their income taxes, rendering them ineligible for a standard mortgage loan. In this case, depending on your downpayment, credit score and gross business income, we can try the "stated income" program offered through either of the two high-risk mortgage insurers CMHC (Canada Mortgage and Housing Corporation) or Sagen (formerly Genworth). To qualify under the stated income program, the lender, along with the insurance company, will review the following:
If you qualify, the bank will offer you the best mortgage rate, which is an insured rate. However, you will have to pay an insurance premium, added to your basic loan amount and amortized out to a maximum of twenty-five years.
Suppose you don't qualify under the stated income program or conventional criteria. In that case, depending on the size of your downpayment, we could apply with an alternative lender, also known as an "Alt" lender. Alt lenders don't necessarily rely upon conventional income but can consider bank statements or even invoices and contracts to verify revenue. Alt lenders usually charge .50% to 2% more than traditional loans and a commitment/lender fee of approximately one percent of the loan amount.
PENSION INCOME AND GETTING A MORTGAGE
Many potential borrowers are surprised to learn that pension income is a qualifiable source of income for Canadian mortgage loans. Banks can either use pension income from Canada Pension Plan, Old Age Security, Retirement Income Fund, or more to qualify you. With prime lenders, your pension income will have to service the loan using standard qualifying criteria, and if it can't, you will likely have better luck with an "Alt" lender since these types of lenders can lend more based on income to mortgage amount ratios.
What if you have zero income?
It's still possible to obtain mortgage financing even if you don't have income. You may need to apply with a private lender that can consider the amount of your down payment or available equity along with your credit score. Depending on your age, you may also qualify for the CHIP Reverse Mortgage that pays you each month using the available equity in your home. The CHIP mortgage may be the best option if you have a lot of equity but don't have income.
You may also be able to qualify without income if you have a co-signer who can apply with you. A co-signer may be able to go on title with you or remain off-title as solely a guarantor.
If you have any specific questions, get in touch with us by phone or email.
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929