Millions of Canadians don’t work as an employee and instead are considered self-employed individuals. These people have the freedom of being their own boss. While that sounds amazing at first, it does come with some disadvantages. For many people, one significant setback of being self-employed is not being able to take out a mortgage. However, in this guide, we’ll show you that getting a loan as a self-employed individual is not only possible but can be easy with the right help.
Why Lenders are Strict Concerning Self-Employment
When you’re trying to get a mortgage as a self-employed individual, it’s important to remember that there will be some unique challenges. This is because job stability can be limited. It’s also important to consider that self-employed applicants are more likely to have a spotty credit history. This means that lenders may have more restrictive guidelines for self-employed applicants.
Getting a Mortgage as Self-Employed
In order to be eligible for a mortgage, you will still have to meet your lender’s qualifying standards for income. In other words, you have to have enough income to be able to pay your monthly mortgage payments.
Self-employed individuals don’t always have a stable booking schedule. This makes it hard for them to apply for a mortgage as a self-employed individual because conventional lenders don’t have a way to access the income of someone that doesn’t have an employer. But there is a way to get around this.
How Self-Employed Individuals Qualify for a Mortgage
Self-employed individuals who want to take out a mortgage will find that their lender will need to verify their income. However, the typical methods of proof aren’t always available to those who work for themselves. In order to overcome this, lenders have come up with a couple of options for self-employed persons who want to be able to take out a mortgage. These include:
Business Number Registration
Lenders can rely on сorporate documentation when assessing the income of self-employed individuals. This is because self-employed individuals often register their business with the Canada Revenue Agency (CRA). What this means is that their business number can be used as proof of income when applying for a mortgage.
As a self-employed individual, you probably have your own bank account connected to your business or personal account. It’s also likely that you have a business account at an institution other than the one that you use for your personal banking. This is even more beneficial because it means you have the option of applying for a mortgage by providing bank statements from one of your business accounts.
For non-traditional income verification, lenders also allow self-employed individuals to provide financial statements instead of pay stubs. This is usually more effective than other income verification types in this situation.
Notice of Assessment
There is another option for self-employed individuals who want to apply for a mortgage. This involves the mortgage applicant submitting a Notice of Assessment or your T1 General Income Tax Returns for the previous two or three years. This way, the lender can see a complete picture of your income and use it to calculate your mortgage.
This guide has shown you that getting a mortgage as a self-employed individual isn’t impossible. But it may be more difficult than getting a mortgage as an employed individual. The key to getting a mortgage as a self-employed individual is making sure to meet your lender’s requirements for income verification.
If you think you can qualify for a mortgage even if you’re a self-employed individual, then the next step for you is to find a mortgage agent who can help you connect with a lender. This is where Ottawa Mortgage Services comes into play. We provide mortgage agent services for first-time home buyers, self-employed individuals, and commercial clients. Reach out to us today to get your free assessment with no obligation.