Self-Employed? Here’s what it takes to get a mortgage.

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When you’re self-employed, getting approved for a mortgage requires a little more effort than the traditional process of simply providing an employment letter and previous pay stubs. Since you’re essentially responsible for paying yourself, you’re faced with a little more scrutiny. Not to worry – I’m here to help you navigate the process!

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Now, because you’re self-employed, there are a few things you want to ensure you have in place before applying for a mortgage:

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Ensure that your HST and/or GST has been paid in full (banks will ask for proof!)

Since you operate a business, banks will be under the assumption that you charge taxes for your product or service, and since you’re directly liable to the CRA, they want to ensure you’ve paid the appropriate taxes so that the CRA won’t come after you after you’ve closed on your mortgage (they’re trying to limit their risk as much as possible!)

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File your taxes on time!

When you’re self-employed, it’s quite common for your revenue/income to fluctuate based on the demand for your business. Banks will typically ask for your last 2 years Notice of Assessments to ensure, that at least over a calendar year, there is some level of consistency in your income. Making sure your taxes are filed and having the assessments ready makes it easier to understand what you qualify for and get your approved.

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Business License and Ownership

Sounds simple enough! Banks want to ensure that if you indicate you’re self-employed, that you truly own the business. You can prove the easily by providing your business license, or if you’re incorporated, by providing your articles of incorporation.

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Pay your bills on time!

When you run your own business, you may have certain bills registered in your personal name as you likely needed to offer some sort of guarantee when registering or signing up for a service. Since the number of items reporting to your credit may have increased when you started your business, it’s that much more important for you to stay on top of all your bills. A single missed payment reported to your credit bureau can significantly impact your score. Ensuring you have a strong credit score increases the number of mortgage products you’ll have available to you.

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Down payment

Even if you’re self-employed, you’ll still have access to high-ratio insured mortgages. That simply means you’ll be able to purchase a home even if you don’t have a 20% down payment. Placing a down payment that is less than 20% will require your mortgage to be insured by CMHC, Genworth or Canada Guaranty.

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All that sounds easy right? While it does require you to be a little more organized, being self-employed does not limit your options for a mortgage. Following the tips above will make your mortgage process a breeze!

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Got a question? Don’t hesitate to reach out!