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Securing a mortgage while being self-employed can be a bit more challenging but it is achievable. With the right guidance from a trusted mortgage agent at Clover Mortgage, you can get approved easily and get AAA rates from one of the over 40 lenders that we have the ability of working with.
A lender that is accepting of stated income mortgage applications will in many cases consider the average of the last 2 years of your gross reported income before tax write-offs. In certain cases, select lenders will accept looking at your other sources of income including income from side jobs like Uber driving income, cash income, and more.
At this rate, this new gig economy might become the centre of the working world. Many types of lenders will take your credit history and credit score into account when reviewing your application. If you have high outstanding debts or balances on your credit cards, plan on either paying them down as much as possible before applying for the loan.
The up side to writing off these expenses if that you can save on the amount of income tax that you pay (Canada Mortgage And Housing Corporation Ottawa). The down side is that when applying for a mortgage or loan through a bank, this will limit the size of mortgage or loan that you can qualify for and the interest rate discount that a bank might give you.
Since most traditional banks, such as Scotia Bank, will take the average of the net income you reported for the two most recent years, your qualifying income would only be the average of $40,000 and $30,000, which equals $35,000. This kind of income will not qualify you for much of a mortgage, if any mortgage at all, simply because it is unlikely that you will be able to afford to pay the mortgage.
For the year prior, you also earned $120,000 and deducted $90,000 in expenses, leaving you again with $35,000 in declared net income. Since mortgage lenders who accept stated income applications understand that your tax fillings will be in the interest of saving money on your taxes. As a result, these lenders will consider the gross income you earned before your writing off expense deductions and other tax write-offs.
Now you can qualify for a real mortgage and obtain competitive mortgage rates and mortgage terms (depending on other factors that the lender will review). In addition to the gross income that you reported, you might also be allowed to use other income sources such as cash income, Uber income, and more, on a case by case basis.
Some lenders have special offers for low mortgage rates for self-employed individuals. If you have less than perfect credit, then Clover Mortgage has lenders who we work with that specialize in lending mortgages to individuals who are self-employed and who have less than good credit or high debt to income ratios due to unpaid debts or high balances on their credit cards.
Is It Hard To Get A Mortgage If You Are Self-Employed? Although getting a mortgage while being self-employed shouldn’t be difficult, at a bank it can be harder and more stressful than it would be for a salaried or hourly full-time employee. Most lenders require a borrower to submit documentation detailing their income, net worth, credit score, and much more.
Stated income is the amount a person claims to earn and it must be proven through a variety of documentation. Although a lender cannot exactly calculate and verify to 100% certainty the income of a stated income mortgage application, the more proof you can provide the better your odds are of getting approved for a great rate.
Those are not always must haves since certain lenders may not have that as a requirement (Get the latest mortgage news). This is why it is important to work with a qualified and experienced professional mortgage broker or agent. Their services can help you qualify for the mortgage loan you need. At Clover Mortgage, we specialize in helping our clients search for quick and easy alternative lending solutions at the lowest competitive rates and best terms available to them.
The government of Canada has rights over your property and one of those rights allows them to place a registered lien on your commercial property or home for unpaid taxes, and that registered lien will come in priority over any mortgages. This is why most lenders would like to see your Notice of Assessment or see another type of proof that you have paid all of your personal taxes and have no back taxes owing.
With alternative and private lenders, the income on these notices will not be considered since the income stated in this assessment is net income after deductions. If you are incorporated or want to try to have the lender accept business income in addition to your personal income, providing documents such as banking statements or statements of accounts showing that there this is in fact an additional source of revenue may help you qualify for a higher mortgage at a lower rate.
If you are a business owner or if your company is incorporated, many lenders will ask you to provide a copy of your business licence or your articles of incorporation for them to see and review. The articles of incorporation should list you as one of the owners. These articles are only available if your business is incorporated.
If however, your credit is bad, or you have past bankruptcies in your life, or you have high balances on your credit cards and other debts, then an alternative or private mortgage lender might be your best choice, despite the added lender fee. A private lender will typically offer a 1 year term or 2 year term, but some will have different types of offers regarding term lengths and their fee structure.
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