How Long Do You Have To Be Self-Employed To Get A Mortgage​

It’s essential to understand that different mortgage lenders in Canada cater to self-employed borrowers. These lenders are referred to as A, B and C lenders.

“A” mortgage lenders are considered prime mortgage lenders, and they include major banks, credit unions and monoline lenders (lenders without a storefront and offered exclusively by mortgage brokers).  Prime lenders provide the best interest rates and most competitive mortgage terms. 

“B” mortgage lenders are considered alternative mortgage lenders, and they also include banks, credit unions, etc. Alternative lenders are still regulated financial institutions and, therefore, still provide competitive financing options; however, the interest rates and terms correspond to the level of risk involved. Therefore, alternative lenders charge higher interest rates and fees and usually have shorter mortgage terms because the risk is higher. 

“C” mortgage lenders are considered private lenders. They include individuals and corporations who do not adhere to specific lending guidelines. They usually only consider available equity/downpayment and not necessarily the strength of credit, employment, etc. 

Qualifying For A Mortgage With Prime Lenders If You’re Self-Employed 

To qualify for a mortgage with prime lenders, self-employed borrowers need to have qualifiable income, which means enough money claimed on their taxes to service the mortgage loan payments. They also need to demonstrate creditworthiness.  Some prime lenders do offer programs that use gross income instead of qualifiable income. Still, the borrower must have a credit score of at least 680 and be able to prove they’ve been self-employed for at least two years. To find out more about Stated Income Programs, call us today. 

Nevertheless, all prime lenders require that a self-employed borrower complete the last two years’ worth of income taxes with no outstanding tax arrears. 

To qualify, you must have: 

• Financial statements for your business.
• Proof that your HST and/or GST is paid in full.
• Contracts showing expected revenue for the coming years.
• Your personal and business credit scores.
• Proof that you are a principal owner in the business.
• A copy of your borrower’s business or GST licence or Article of Incorporation showing you are licensed.
• Proof that your down payment has not been gifted. 

Qualifying For A Mortgage With Alternative Lenders If You’re Self-Employed

To qualify for a mortgage with alternative lenders, self-employed borrowers do not need to be in business for at least two years and do not have to have qualifiable income. Alternative lenders can use other forms of income to help a borrower qualify, including bank statements and invoices.

To qualify for a mortgage with an alternative lender, you must have at least a 20 percent down payment. 

Qualifying For A Mortgage With a Private Lender If You’re Self-Employed 

Private lenders usually do not need to verify income or credit, even though they will still need a copy of your credit report and mortgage application. Instead, they rely on the amount of down payment you have or available equity, if refinancing, for example.

What Banks Require For A Self-Employed Mortgage

Most banks require self-employed borrowers to have the following: 
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1. Excellent credit history.
2. Income Tax Documents for the last two years together with their T1 Generals that includes the Statement of Business and Professional Activities.
3. Sufficient income claimed on Line 150 of their Notice of Assessments in order to qualify for the best interest rate and support the amount of mortgage loan they require.
4. Have had to been in business for at least 24 months in order for your income to qualify.

What If You Don't Claim Enough Business Income To Qualify For Financing

Whatever your profession, there are numerous hurdles to jump when it comes to getting a mortgage. But what if you're self-employed? These career changers have more obstacles than most when they apply for a new home loan, but brokers can help by working with lenders willing to consider them as acceptable risks.

Business For Self Stated Income Program.

We also offer stated income programs which are available through Canada Mortgage and Housing Corp. and Canada Guaranty. Under the stated income program, income is based on "reasonability" and not on what is claimed on income taxes. Usually only a Notice of Assessment is required for the past one year to show there are not any outstanding income taxes owing to the Canada Revenue Agency. 
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• Stated income programs are available for purchases with as little as a 10 per cent down payment. 
• Commissioned Sales People DO NOT qualify. See below. 

If stated income programs are not possible, we also offer alternative loans which do not require income documentation but can rely on other means of verification such as bank statements, contracts, invoices, etc. We also offer extremely competitive mortgage interest rates. 

If you are refinancing your property, we can work with you to obtain a home equity loan with minimal income verification. 

Start your mortgage application today. Call me directly at 647-773-4849 or Apply Online.

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