Self-Employed Mortgage Financing Requirements

By Sandra Grywul on Apr 10, 2011 in Canada, First Time Home Buyers, Mortgage

Many self-employed applicants put off home ownership based on their financials, or lack thereof.

However, Mortgage Insurers and Lenders within Canada have made homeownership easier than ever with specific programs for today’s business owner.

Here are the first things to consider prior to searching for financing:

• You need 2 years history in the same type of work
• If you have been Self-Employed for more than 2 years, but less than 3 years, you can obtain a mortgage approval with alternate documentation proving your income, such as  a Self Declaration of your Income
• If you have been Self-Employed for more than 3 years, you must prove your income to the Lenders

For borrowers Self-Employed greater than 3 years, have the following documents ready prior to applying:

1. Last 2 years T1 Generals
2. Last 2 years Notice of Assessments
3. Audited Financial Statements signed off by an Accountant
4. Business License or Registration

Based on your application, your Lender may waive some of the documents listed above, or request additional forms of confirmation.  In some cases, the Lender will make exceptions on alternate documents, if the information provided satisfies the request.

For borrowers Self-Employed less than 3 years, but in the same type of work for more than 2 years, you can use a combination of the following documents to apply:

1. Self-Declared Letter
2. Business Registration
3. GST License
4. Articles of Incorporation, or Partnership Agreement
5. Business License
6. Notice of Assessment
7. Website Address
8. Recent Invoices to the Business
9. Cleared Business Cheque

Many banks today have reduced the amount of documentation needed, and in some cases are satisfied with a Business License, Notice of Assessment, and a Self-Declared Income Letter.

If you have not filed your taxes, you can still obtain financing.  A self-insured Lender, or Private Lender will require a down payment of at least 15-20% (or greater), a selection of documents listed above or alternate documentation, without the need for a Notice of Assessment or T1 General.  Keep in mind you will pay a higher rate than what is offered at a major bank.

Get started by contacting an industry professional.  A Mortgage Broker, or Mortgage Agent will help you find financing suited to your needs.

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