August 24, 2023

The Ultimate Guide to Securing a Mortgage for Self-Employed Canadians

The Ultimate Guide to Securing a Mortgage for Self-Employed Canadians

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Embracing self-employment is liberating, isn’t it? You’ve got the freedom to follow your passion, and the flexibility that comes with being your own boss. But there’s a hitch when you’re trying to secure a mortgage. Suddenly, it seems like lenders see your professional status as a risk rather than an achievement. But don’t worry, we’re here to level the playing field. You can absolutely own your dream home without bending over backwards to fit into a “traditional employment” box. This guide is here to help you understand and navigate the mortgage process as a self-employed individual in Canada.

1. Validate Your Income – Embrace the Paperwork

Income verification is a crucial step in the mortgage approval process, particularly for self-employed individuals. Lenders usually require at least two years’ worth of income statements. But remember, your self-employment income need not be a wild card. Consider stated income applications, which require a signed income declaration and proof of self-employment. You can also include your business’s gross deposit over the last 12 months or retained earnings within your corporation as qualifying income.

Keep your last two years of full T1 Generals and associated notices of assessment handy. If you’re incorporated, you’ll need your articles of incorporation. If you’re a sole proprietor, don’t forget your business or HST registration. Your bank account statements from the last six months will also be required.

2. Bolster Your Credit Score – Show Them You’re Reliable

In the eyes of lenders, a robust credit score is like a golden ticket. It’s a testament to your financial reliability and creditworthiness. Make sure you’re paying all your bills on time, and keep your debt-to-income ratio low. Regularly review your credit report to ensure there are no errors that could dampen your score.

3. Beef Up Your Down Payment – Make a Strong Statement

While every home buyer needs to make a down payment, going big can tilt the scales in your favour if you’re self-employed. In Canada, a down payment of less than 20% necessitates mortgage insurance. But, as a self-employed person, a larger down payment can boost your appeal to lenders.

4. Partner with a Mortgage Broker – Find Your Navigator

The mortgage process can be a labyrinth, and it’s even trickier when you’re self-employed. That’s where a mortgage broker comes in. Think of them as your experienced guide who can help you navigate this complex process. They can connect you with lenders who understand your unique challenges, and even help you create a winning strategy if you’ve been self-employed for as little as six months.

5. Consider Alternative Lenders – Explore All Avenues

If traditional lenders seem a bit standoffish, don’t lose heart. Consider alternative avenues such as credit unions or private mortgage lenders. These lenders may be more flexible, and could accept different forms of income verification. Be mindful though, their interest rates may be slightly higher.

6. Roll with Irregular Income – You’re Still Eligible

If your business produces a seasonal income or if your income is irregular, it’s still possible to qualify for a mortgage. Just bear in mind that the same income requirements apply as if you earned a full-year income.

So, fellow self-employed Canadians, don’t be daunted by the mortgage process. You’ve mastered the art of running your own business; this is just another challenge you can conquer. And remember, mortgage brokers can be your invaluable ally in this process. They can guide you, provide you with multiple options, and help you make the best decision for your unique situation. Here’s to owning

If you are a self-employed individual looking for a mortgage, it would be in your best interest to gather the required income documents and begin a mortgage pre-approval process with us. Contact us to speak with one of our self-employed mortgage specialists to help you organize and obtain the relevant documentation for you. Our digital document collection process simplifies the process, making getting pre-approved as hassle and stress free as possible.

At Everything Mortgages, we strive to help first-time homebuyers, small business owners, and hardworking professionals navigate their mortgage journeys. Whether it’s securing a loan or seeking better solutions, our team is here to guide you toward becoming mortgage-free sooner and building wealth faster. Reach out to us today to explore these strategies and more.

Note: This article is intended for informational purposes only and does not constitute financial advice. Please consult a financial advisor or mortgage professional before making decisions about your mortgage.

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