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Wednesday, 22 May 2013

Mortgage challenges for the self-employed

For many Canadians, proving their income to a Mortgage Broker or a lender for the purpose of obtaining a mortgage is as simple as providing T4 slips. For the self-employed, the process is more complicated than that. Self-employment is steadily becoming more and more common in Canada, and many who report only to themselves are becoming very financially successful. However, with fewer ways to prove income, lenders will still tend to proceed with caution when faced with a self-employed client.

Following the introduction of new mortgage legislation last summer, the screening of potential applicants has become more detailed. From analysing the income for the applicant based on the average income someone in their field would make, to assessing the length of time their particular operation has been established and carefully examining the income reported to the Canada Revenue Agency, it is a detailed process. Thankfully, there are several things that can be done to ease the process.

  • Pay down debts, increase savings and check your credit. Lenders will want to see that you have a good credit score, and the ability to service any debts properly. Clients with several high-interest credit products and little savings are typically viewed as much less desirable candidates for a mortgage.
  • Be prepared. It is suggested that you accumulate 3 years of tax documentation showing your reported income. Your business license, articles of incorporation, and client contracts are also important documents to have on hand.
  • Consult a professional Mortgage Broker. Navigating the waters of mortgage lending isn't always easy, especially for those who are in business for themselves. A Mortgage Broker will do the navigating for you, negotiate with lenders, and find a mortgage that is the perfect fit for you.
Click here for the full article from the Toronto Star.

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