With more and more of the major banks pulling out of the stated income market, how are self-employed people ever supposed to get a mortgage? And why are self-employed mortgages so hard to get?
Self-employed mortgages actually aren’t hard at all to get if you have verifiable income. If you have a way to verify that you made as much as you say you did, the bank will continue on with your mortgage paperwork just as though it were any other mortgage. However, because self-employed individuals can’t get a letter from their employer or bring in pay stubs, they need to have another form of verifying their income. Usually, that’s income tax.
How much income you declared on your last income tax return can be used as your verifiable income. However, often one of two problems crops up. Either the individual seeking a mortgage hasn’t filed taxes, or they have significantly reduced the amount that they made, in order to pay fewer taxes. This is the problem, and why it’s so hard for so many to get a self-employed mortgage.
If you have filed your taxes, and you’ve claimed the proper amount (and it’s an amount that’s high enough to make you eligible for a mortgage,) any lender will be happy to give you a mortgage or second mortgage – but you must have a high enough amount of verifiable income. And that means that you must file your taxes every year, and that you must claim all of your income so that you can be eligible for a self-employed mortgage.
According to Statistics Canada, nearly 20 per cent of all income earners in Canada are those that are self-employed; and it’s a field that’s only going to continue to grow, especially if economic and jobless conditions continue on as they have the past couple of years. But being self-employed is something to be proud of, and you should never think it’s holding you back.
While some lenders will still only look at credit history, your down payment, and your stated income, this is become an obsolete practice for many major lenders. File your taxes properly, and you’ll have all the verified income you need. And then, it won’t be hard for you, as a self-employed, to get a mortgage at all.
To even better your chances of getting a mortgage when you’re self-employed, speak to one of our brokers here at CMI. We have dozens of lenders that want to work with the self-employed, and we’ll put them in touch with you, too!
