Self-Employed

Wondering if you can get a mortgage if you are self-employed? We can help!

For small business owners and those who are self-employed, some lenders may be hesitant to offer you a mortgage. We understand that when you file a tax return you can claim several expenses that reduce the taxable income on your documents.

However, this reduction in income can hinder your ability to qualify for a mortgage. That is where we come in. We can help you find the right mortgage product that fits the needs of the small business owner.

How to Get Approved for Self Employed Mortgage

Most self-employed individuals do not have the traditional documentation that lenders look for but there are ways to qualify for a mortgage, even without these documents. Here are some things to consider when you are considering a self-employed mortgage product.

Alternative mortgage financing can be obtained at 20% down if you are buying an owner-occupied property. For rural real estate that has well or septic systems, it is 35% down.

For those who are still in their first year of business, you can still qualify for a mortgage. You simply need to have proof of your self-employment status such as business registration or Articles of Incorporation. Lenders will also want to see a few months of bank account details for your business including some invoices that can be used to prove your income.

Whether your credit is good or low, we can connect you to lenders that will work with you. Your credit rating will still impact the interest rate you are offered as well as how much the lender is willing to offer. In these situations, the lenders focus more on the quality of the property, where it is located and what marketability it offers. Self-employed mortgages can be used to buy a home, a rental property or even to refinance home equity mortgage.

While every application is unique, here is an example of what a self-employed mortgage looks like for someone who does not have proof of income.

Alternative mortgage lenders in Ontario do not only rely on documentation like income tax returns. Rather, they will ask for your business registration, bank statements, invoices and other documentation. For example, if you need to have $100,000 of self-employment income to qualify for the mortgage, lenders might ask you for bank statements from the past 6-12 months that show sufficient deposits coupled with client invoices or letters from an accountant.

There is one drawback to self-employed mortgages and that is the higher interest rates that borrowers will be charged. In addition, you will need to have at least 20% for a down payment and be able to cover lender fees worth about 1% of the mortgage amount. While you can use gift money as a down payment, lenders will want to see that at least 5% of it was your own money.

You can expect alternative lenders to offer you a mortgage that is between 65 and 80% of the purchase price of the property. It depends on your individual situation, the quality of the real estate and the strength of your application.

Another consideration for those looking at self-employed mortgages is that banks pay us as mortgage brokers to help them find good credit and good income clients. However, alternative mortgage lenders do not pay us for our services. This means that you will need to pay some extra fees for us to connect you to the right lender for your mortgage.

To find out more about self-employed mortgages, contact us today.

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