It is no longer as easy as it once was for the self-employed to obtain mortgage financing. If you have tried to secure a mortgage recently with an institutional lender, you may have already found that out for yourself.
In the past, all you had to do was state your income to your lender without any third party verification. As long as you had a great credit rating, that was good enough, But not any longer. Now you have to provide documentation to prove you have the ability to make your mortgage payments.
There are still good options available with traditional lenders, such as banks or credit unions but you will have to prove that you are declaring a “reasonable income” for your profession on your tax returns and also have a great credit rating. These two factors combined could be a challenge for many who are self-employed as their accountants may be minimizing their income declared for tax purposes which is great unless you are planning to secure new mortgage financing.
With these standard mortgage programs you will either require a minimum 35% equity or if you have less than a 20% down payment, a lender will require a minimum of two years proof of income as self-employed.
The good news, there are many alternative lender options for self-employed clients who no longer qualify with a traditional lender. These lenders are the market’s response to consumer demand spurred on by the tighter mortgage regulations.
These are reputable companies who offer alternative mortgage products to consumers who can no longer qualify with conventional lenders. They fill an important role in fulfilling the dreams of home ownership for Canadians or have assisted with financing needs in other ways such as accessing equity or refinancing to pay off high interest debt.
Many of these lenders, who currently offer prime mortgages, are now expanding their offerings beyond traditional mortgages to fill this gap in the market and are generally only accessible through mortgage brokers.
My best piece of advice for someone who is self-employed and looking to obtain a mortgage whether it is to purchase a property for the first time or moving up, refinancing a mortgage or looking to purchase an investment property – be prepared! Meet with your mortgage broker well in advance to discuss what is required to obtain a pre-approval for your financing.
You may have to work a little harder and provide more documentation but there are still many options available to the self-employed so please give me a call 1-888-561-2679 to ensure that you are in the very best position when it comes time to arrange your mortgage financing.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.