Programs to assist self employed home buyers have come a long way and there are a number of “Business For Self” products available. Financing is available up to 90% for home purchases and up to 80% for refinances, and with amortizations out to 30 years, provided there is solid credit history and required documentation is provided.
The premise of self-employed mortgage programs is that the lender looks at what you state you make. One of the primary requirements is that the income stated must be reasonable based on the size and type of business. The lender will look at the likelihood of the applicant’s ability to earn what is stated on the application and the lender will want to feel confident that the applicant is able to adequately service the mortgage debt.
- NOAs – the lender will want to see the applicant’s Notice of Assessment (from CRA) to ensure that no taxes are owing and to assess the reasonableness of the income stated. For example, if the discrepancy between what is declared in the NOA and what is stated in the application is unusually large given the type of occupation and its ability to earn cash income, the lender may ask for additional supporting documentation. A common scenario is real-estate agents or financial planners. Normally their stated income would not exceed the declared amount as they cannot earn cash (unreported) commissions. They may write all expenses off against their income, but the top-line declared income would still show on the T1 Generals or NOA and support the income stated.
- Evidence of at least two years continuous self-employement by a third party is generaly required.
Businesses which generate all cash earnings (no declared earnings) and applicants with multiple businesses are generally unable to meet the income or third party documentation requirements.
Contact Us to review your needs and to find your best mortgage solution.