Whistler Blog

Qualifying for a Mortgage when You’re Self-Employed

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Squamish is home to an increasing number of new businesses and startups and we are noticing even more companies choosing to relocate to the area. With more businesses we are also noticing a lot more freelancers and self-employed people looking for properties.

While self-employment comes with its benefits, it does have some challenges when it comes to buying a property, with high barriers to entry that can sometimes cause issues.

It is no secret that qualifying for a mortgage as a self-employed Canadian is more difficult than for those in other professional roles, however, with the right planning you won’t have too much trouble getting into the housing market.

Our Realtors regularly work with self-employed people in Squamish looking to buy and if you’re properly prepared and organized then the process will remain smooth.

The issues of applying for a self-employed mortgage

Applying for a mortgage in general, especially if it is the first time, can potentially seem like a daunting process. For self-employed Canadians the process can be even more arduous and require more time and effort.

The main problem people find is that it can be difficult to prove your income to lenders. In addition, many business owners tend to expense as much as possible in order to minimize the taxes they pay, meaning that lenders have to be more discerning when it comes to issuing mortgages.

Since 2014 when the Office of the Superintendent of Financial Institutions (OSFI) introduced Guideline B-21, banks are required to look far more closely at self-employed incomes before being able to approve a mortgage application.

What do you need?

The first thing you need to prove is earnings. You will need to provide 2-3 years’ worth of notices of assessment and tax returns, along with the following:

  • Proof that HST and/or GST is paid in full
  • Copy of business licence or articles of incorporation
  • Financial statements for your business – income, expenses, profit/loss
  • Proof that you own the business
  • Client contracts showing expected revenue for coming years

You will also require a downpayment of at least 15% in order to qualify for a mortgage.

Changes to the process

This may seem like a daunting prospect, however, the government has recently made efforts to ease these additional hurdles that self-employed Canadians face when trying to purchase a home.

Changes came into effect in October of 2018 that are aimed at allowing lenders to have more flexibility when evaluating applications for self-employed borrowers. The changes allow you to submit proof of income statements, along with statements of business or professional activities as additional ways of proving income.

So, while there are additional documents required, if you are organized and have everything at hand there shouldn’t be too much trouble securing a self-employed mortgage.

 

For more information on buying a home in Squamish, or applying for a mortgage, get in touch with one of our local Realtors who will be able to answer your questions and provide recommendations on local mortgage brokers.