It can be a difficult process to get approval for a mortgage when you’re self-employed. The process is difficult because you need to prove that you have income coming in. This is much easier to do when you have a steady paycheck through an employer, but when you’re self-employed your income can fluctuate from month to month by a wide margin. The banks can have a hard time verifying your income to determine if you can afford a mortgage. You need to prove to the bank that the income is consistent and that it’s legitimate.
The bank will usually need to look at and review the following types of documents.
Self-Employed Documents Banks Want to See
- Your tax documents such as T4A Slips, T1 Generals, and NOAs
- Certification documents, business license or other registrations
- 90 days or more of bank or personal statements
- Financial statements like balance sheets, income, and other documents
If you can’t provide these documents, you may still be able to work with B lenders as they have self-employment programs that you can utilize. The down payment requirements for a B lender can be 85-90% of the purchase price or home value in a refinance. The rates you receive also tend to be higher as these lenders don’t have the same rates as the A lenders do. The upside to B lenders is that they will ask for less documentation because they have different underwriting criteria and their funds aren’t insured by the large insurance companies.
When you try to get a self-employed mortgage through a regular A bank, your tax documents don’t need to show the insurer exactly what they need for the mortgage deal to go through. The industry understands the advantage of tax benefits that many employed applicants don’t. Insurers and the banks are looking for income that can be proved within reason, so the mortgage deal can work.
Applicants for a mortgage that are self-employed think that getting a mortgage is difficult because they hear this type of talk daily. If you don’t think you can get a mortgage as a self-employed person here are a few questions you need to think about.
Self-Employment Questions to Ask Yourself
- Is the business registered legally? Do you have a copy of the incorporation or the license?
- Are your personal taxes and business taxes up to date? Are you able to provide the necessary tax documents?
- Can you provide personal bank statements or the cash flow through your business?
- Has your business been operational for two fiscal years or more?
- Can you provide business slogs, contracts, invoices, accounting letters, financial statements or other documents to help us determine eligibility?
If you answer yes to any of the questions above, then you probably can get a mortgage as a self-employed individual. Your situation may be different from someone else so be sure to talk to the lender.
Summary – self-employed mortgages
If you’re self-employed it’s not as hard as you might think to get approval for a mortgage. As long as you can show the lender that you’re employed and can back up your claims with documents about income and provide tax information you should be fine. You may have to work with a B lender and not the banks as they can have stricter rules, but you should get the mortgage you want through a B lender, it just might cost you more as the rates tend to be higher.
