FAQS FOR SELF-EMPLOYED HOMEBUYERS

1. FAQS FOR SELF-EMPLOYED HOMEBUYERS

2. Working for yourself can be hugely rewarding, and millions of Canadians are happily self-employed. However, when it comes to buying a home, it can make getting approval for a home loan all the more difficult, as the major banks require borrowers to have secure, stable and long-term employment, and on average, require at least 2 years of income statements to qualify. So, if you’re a self-employed Canadian, what can you do to secure a mortgage?

3. Not sure quite who qualifies as self-employed? Contractors, freelancers or entrepreneurs who issue invoices instead of pay stubs, are self-employed. While there is no such thing as a separate mortgage for self-employed individuals, typically they must take a longer, more complex path towards applying for, and being given a mortgage, in comparison to a standard, payroll employee.

4. What must you do to qualify for a mortgage as a self-employed person? With self-employed people, their gross earnings are treated differently to those of salaried employees: lenders will only use 80% of your gross earnings and the average of last tax year’s income for commissioned sales people, and net income, instead of gross income, for self-employed individuals. The CMCH or Canada Mortgage and Housing Corporation, restricts lenders to use only the last three years of self-employment income.

5. What do the rules say is a qualifying income? Mortgages are usually obtained by self-employed individuals through stated income (how much you claim you earn) applications, and these need a signed income declaration and proof of self-employment. If most of your income is kept within your company, you may be able to qualify a mortgage using the gross deposit of business income over the last year, or allowing for retained earnings within your corporation.

6. What income documents must the self-employed provide for a mortgage application? • You’ll need to provide your chosen lender with your last two years of full T1 Generals and the following associated notices of assessment: • For those who are incorporated, you’ll need to provide your whole articles of incorporation • For those who are sole proprietor’s, you’ll need to provide your business or HST registration • Your last six months of bank account statements

7. If self-employed, how long must you have been in business to qualify for a mortgage? In general, lenders ask for proof of earnings from at least the last two years, although they sometimes make exceptions for certain professionals such as doctors and engineers, or for anyone starting a new business in the same industry in which they previously worked and enjoyed a lengthy career in. Can you still qualify for a mortgage if your business has a seasonal or irregular income? Yes, you can; the requirements related to income are no different than if you earned a full-year income.

8. If you’re struggling to make sense of the many requirements needed as a self-employed mortgage applicant, why not seek help from a professional mortgage broker? With their experience and expertise, they can help you make sense of it all and find a lender who may view you more favorably.

9. Red Key Mortgage is located in Calgary, Alberta. We are a boutique brokerage with high volume serving hundreds of clients locally and nationwide every year. We have a number of associates dealing in mortgages as licensed by the Real Estate Council of Alberta. Being a calgary mortgage specialist, Red Key Mortgage, will provide all of your available options from the entire mortgage market and allow you to make an educated decision where you'd like your mortgage to go. Red Key Mortgage works with big banks in Canada, as well as over a dozen other AAA lenders. Best of all, our services are paid for by the lenders at no additional cost to our clients. If you are looking for 2nd mortgage in calgary, contact us today! We can't wait to get started.