It is estimated that 15% of Canadians are self-employed, and that number is steadily growing. Being your own boss, making your own hours, what’s not to love? Well, turns out getting a mortgage can be a bit more of a challenge than for their 9-5 counterparts. While the process can look a little bit more complicated from the outside, it is not impossible. In this week’s article, we are going to explore the mortgage process for self-employed Canadians.
Lenders often tend to gravitate towards traditionally employed borrowers because self-employed borrowers pose a higher risk. Income can be difficult to prove, making it a challenge for lenders to decide whether or not they can trust the numbers they’ve been given. To remedy this, most lenders require a personal tax Notice of Assessment for the past 3 years. Those who successfully provide this information can generally access the same mortgage products and rates as traditionally employed borrowers.
There are a few more documents that a lender may ask for before approving a mortgage application. Here are some examples:
- Financial business statements.
- Proof that your GST is paid in full.
- Contracts predicting expected revenue.
- Personal and business credit scores.
- Proof you are a principal owner of the business.
- Proof that your down payment has not been gifted.
Ways to Improve Your Odds
For those who want to increase their chances of getting a loan, there are three major steps you can take:
- Have a great credit score. Credit history is more important for a self-employed borrower than a traditionally employed one. Before you submit your application, make sure that you have built your score up. For tips on how to improve your credit score, click here.
- Organize your documents. As a business owner, you’re probably incredibly organized. Use that skill to your advantage and get your documents together early. Ensure that everything you may need is easily accessible in one place.
- Go for a broker. There are many lenders out there who refuse to service a self-employed borrower. But there are some that cater specifically to those cases. So how do you know what lender to apply to? Simple, work with a mortgage broker. Brokers know the industry better than anyone, and they can filter out all of those who won’t even look at your application. This will save you a lot of time, money, and effort.
If you are self-employed, don’t resign yourself to renting for the rest of your life. Obtaining a mortgage is a realistic, practical goal that we can help you achieve! If you’re considering applying for a mortgage, but don’t know where to start, contact the mortgage professionals at Source Mortgage today!