Mortgages for the self-employed

There are many challenges to being self-employed, but home ownership shouldn't be one of them. For self-employed individuals, the process of applying for a mortgage or refinancing is likely to be more complex than it is for salaried workers. Proof of income is an essential part of the qualification process, and obtaining this proof is not always easy for those who own a business and do not have the same income from week to week. This can be not only challenging when approaching a lender, but frustrating for the applicant. This article from the Globe and Mail provides readers with a helpful basis to better prepare for the application process.

When a lender deals with a client who is self-employed and cannot provide what is referred to as verified income, they instead must rely on stated income. Stated income can be proven to a lender through tax returns, notices of assessment, and financial statements. Although the mortgage is for the individual, the lender is examining the business in addition to the applicant. Simply put, the applicant must show the strength of the business to prove they will continue to have the income to pay the mortgage in the future. The more information an applicant can provide to their lender, the easier it is for the lender to make an objective decision to approve or decline the mortgage. Other information it may be prudent to provide can include: proof that HST or GST payments are up to date, business contracts to show expected revenue, personal and business credit scores, and proof of assets owned by the business.

An easy way to make the somewhat complicated process a little smoother is to consult a qualified Mortgage Broker, an individual who will not only cultivate a relationship with the client, but their business as well. A Mortgage Broker will navigate the process with the client, find out exactly which documents the lender will need, and handle any negotiations.

Click here to read the full article from the Globe and Mail.