SELF-‐EMPLOYED MORTGAGES
WHAT YOU NEED TO KNOW ABOUT
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
The purpose of this is to outline how the mortgage approval process works when you’re applying as a self-employed
borrower.
By the end, you should be well equipped to obtain a mortgage approval while self-employed.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you are self-employed, gather together ALL of your INCOME
documentation before your meeting for a mortgage approval.
This will most likely be a minimum of last 2 years of both personal and corporate income tax documents. If you don’t have these documents,
call ahead to discuss an alternative.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you haven’t been self-employed for 2 years, you’re in store for a detailed chat with
your independent Mortgage Broker or banker.
This type of employment comes with very different income confirmation requirements
than for a borrower who is an employee for a company, with no ownership in that company.
Mortgage qualification requirements are
dependent on your specific income/employment structure, which leads to more
info required at time of application.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
You’re considered a self-employed borrower if one or
more of the following apply to you;
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
à You own your own business, either incorporated or sole proprietor or partner à You are responsible for the payment of your own personal income taxes à You work under contract with your employer and they do not deduct income taxes from your pay
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
One of the most important components of a mortgage application is the qualifying
income, or the borrower’s ability to repay the loan.
If you’re self-employed, there are 2 types of qualifying income that
are acceptable.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
VERIFIABLE INCOME
Which means you qualify using the income you report to the
government and pay taxes on; confirmable by providing your most recent 2 years tax filings.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
STATED INCOME
This allows you to state your income at a reasonable level for your occupation and time in the industry without having to “prove
it on paper”.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Being self-employed can allow a person to write off expenses
related to the operation of their business in order to lower their
personal income and as a result pay less personal income tax.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
A “stated income” mortgage product will cater to this type of
borrower, but because income is not being confirmed by
acknowledgement from Revenue Canada, the minimum qualifying requirements for credit score and
down payment source and amount are different.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you’re qualifying under a “stated income” program,
you are required to have at least a 10% downpayment.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you have less than a 20% downpayment, your credit score and history must be very strong in order to be eligible for approval under “insured” self-employed
mortgage programs at best rates.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
As far as downpayment is concerned, the
requirements vary depending on what type of
lender you’re going through.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you’re applying for a stated income insured mortgage product with best rates, you must have at least 10% of the purchase price available from your own funds to
use for downpayment.
You can use a home equity line of credit, but cannot use any unsecured borrowings or gifted funds unless it’s
above the 10% from your own assets.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
When taking the alternative lender route, there are more
flexible downpayment options available, including seller financing, gifted funds, borrowed funds, or a
combination of all of them.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Again, be aware when going through an alternative lender
under a “stated income” program, the rates are slightly higher than best interest rates and there is
also the possibility of being charged a lender fee.
Talk to your mortgage professional about some preliminary cost quotes
with the alternative lenders so you will know what to expect.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
When it comes to the other paperwork you could be
asked to provide, required documentation will vary
depending on your employment status and lender
conditions.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
All lenders will request proof that you are self-employed or
under contract.
As the documents requested will be specific to your business, discuss with your mortgage
professional what confirmation of self-employment you can provide
that would be acceptable to a lender.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Some possibilities include: - Articles of incorporation - Business license - T1 generals showing statement of business related expenses
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
For the qualifying income conditions, if you’re applying with verifiable income, you will likely be asked to provide at least 2
years Notice of Assessments and/or full personal income tax returns showing your average earnings.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you’re “stating” your income, you could be asked for a self-declared income letter or bank
statements showing income deposits, among other
documentation.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
With regards to credit requirements, the better your
credit is, the more appealing your application is to a lender.
The minimum credit score to qualify for
the insured self-employed product is 700. If you’re score is less than that,
you still have options.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
A good credit score does not exempt you from providing
documentation, though it does help ensure you’re getting
maximum lender access and competitive interest rates.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Don’t limit your options, use a mortgage professional that
has access to many lenders, which translates to many product offerings for you.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If your mortgage has to be insured, make sure you have access to a lender that uses
all 3 mortgage insurance companies.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
If you don’t require an insured mortgage due to a larger
downpayment, it’s even more important to use a mortgage professional who has access
to multiple options, which translates to a higher chance
of approval for you.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Don’t be afraid to ask your mortgage professional what kind of lender access they have and also if they have experience in
self-employed mortgages.
That experience could be the key to structuring your application to produce a favorable outcome.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
I can’t cover all the fine print of our self-employed mortgage products, so
be prepared for in-depth questions about your business, assets and
finances.
Full disclosure is ideal as it will help your mortgage professional place you with a lender whose requirements you meet and whose terms are appealing
to you too.
SELF-‐EMPLO
YED MORTGAGES
JACKIE WOODWARD MORTGAGE BROKER TMG
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
Do you have mortgage
questions?
LET’S CHAT
SELF-‐EMPLOYED MORTGAGES
780-433-8412 [email protected] WWW.MORTGAGEGIR.CA
JACKIE WOODWARD MORTGAGE BROKER TMG
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