Mortgage Self Employed | Mortgage Broker Kevin Carlson Explains Self Employed Mortgages In 2020

Mortgage Self Employed | Mortgage Broker Kevin Carlson Explains Self Employed Mortgages In 2020

[Music] hello everyone my name is kevin carlson i'm a mortgage broker here in canada thank you so much for joining me on my channel to learn a little bit more about mortgage financing today we're looking at mortgages for those who are self-employed now if you're an hourly employee and or salaried and you're looking to apply for a mortgage it's a pretty easy process a letter of employment from your employer your most recent pay stub maybe a t4 that's about it however if you're self-employed the paperwork process is significant um it always has been significant but these days it certainly isn't getting any less so i'm gonna break this video down into a couple of different sections so um the first and most common uh type of mortgage that people apply for is a purchase mortgage so if you're looking to purchase a home and you've got maybe five or ten percent down payment let's talk about those first now if you've seen any of my other videos you'd know that a mortgage of less than twenty percent down means that you're getting an insured mortgage through cmhc gen worth or canada guarantee so when it comes to getting a mortgage and qualifying your income with the lenders and the mortgage insurers the rules are a little bit more strict than if you have more than 20 down typically you need to be self-employed for at least two full tax years and provide your full tax returns and your notices of assessment proving your income from your business if you're a sole proprietor then you also need to provide the typical tax documents that come along with your t1 general tax returns is the statement of business activities if your company is not a sole proprietorship and you are incorporated or you're on a partnership then you need to provide some additional documentation showing the corporate structure of your company if you are not the sole owner of the company things get a little bit more difficult we just have to provide your full t1 general tax returns your personal tax returns along with your notice of assessments so if you're looking to apply for a mortgage and you're self-employed you've been self-employed for at least two years you've got your tax returns and your notices of assessment the key things that we look at when it comes to qualifying your income would be your line 150.

5% Down Mortgage

Now in 2019 that changed it's not lined with 150 anymore it's line 15 000 for whatever reason so previous to that it used to be called line 150 so that is your personal uh taxable income that we use some of the lenders that we work with will allow us to dig deeper into your tax returns if you're a sole proprietorship and you've got a vehicle payment that you use for business purposes and uh you're wearing that personal expense that's called an ad back so if it's a business expense we can sort of add that back to your income a little bit more of a dig dig deeper into your tax return some lenders will also just let us do a blanket 15 percent gross up so adding 15 percent to your line 150 or a line 15 000 as of 2019 to your income on the mortgage application now if you're self-employed and you're typically trying to keep your income down a little bit well it's certainly not going to help the process so when it comes to applying for any sort of mortgage financing or even loans and that sort of thing the t1 general tax returns uh and your no-so assessments those are your income numbers that we look at now if you've really been working hard to reduce your tax burden well it could add a little bit of a challenge to applying for your mortgage quite a few years ago if you're looking at some old blog posts or articles from say five or even 10 years ago you might have come across what's called a stated income for self-employed now that program and those programs have all but disappeared so it used to be back in the good old days if you wanted to get a mortgage and you were self-employed and as long as your income taxes were up to date and you had maybe say 10 down payment your stated income could just be what you feel it might be relative to your industry so even if your notice of assessment might have said ten or fifteen thousand dollars but somebody in your line of work typically makes forty or fifty thousand dollars then that's typically what we did now the mortgage rules changes in canada has kind of gone away from using that sort of program so we don't really have much success doing what's called stated income what there are stated income programs for are for professionals like dentists doctors veterinarians where they do income projections so there's only a few different lenders that do these income projections that some of our our primary lenders like td and scotia where they'll say if you're coming out of uh you know out of medical school or something like that and you're expected to earn a certain level of income and you're looking to purchase a home then that is something that we can actually look at doing is do income projections so that's not necessarily a typically a stated income it is a little bit but it just helps to qualify somebody's income when you're potentially starting a new job and you're just new in your field at a professional field and you can't necessarily qualify on your income if you're professional like that especially in the medical field then they'll look at using these projections another unique way that we can look at income for people who are self-employed is if you're in a certain line of work for a long time so five or ten years and you switch over to being self-employed in the identical line of work then we can actually do what is kind of like projections we look at what you made as a salaried employee or an hourly employee in that same line of work and then what you might be expected to earn as a self-employed individual and then we can certainly use that we don't necessarily need a full two-year history of your self-employed income as long as you came from a related field as long as you came from something you've worked at for a long time establish a trend of income and then you're it's reasonable that your self-employment income might reflect the same so pretty much an easy situation to go through something like that now let's look at the other side of mortgage financing when it comes to say purchases or even mortgage refinancing uh if you're self-employed and we're keeping the loan to value so you know if you're purchasing home at 20 or 25 percent down that's called a conventional mortgage it's not cmhc insured or generate insured it's actually a conventional mortgage so we don't really have to follow the mortgage insurers rules and guidelines when it comes to that we're only following the rules and guidelines with the lenders we work with some of the banks that we do work with have relaxed guidelines when it comes to people who are self-employed and do let us use a little bit more income than what we could have if you had less down payment so if your income isn't quite at the level where you need it to be for an under 20 down payment type of a mortgage then increasing the down payment past 20 percent get to send us some territory of some other lenders that will do something like a stated income product where there look at your income a little bit more easier fashion and can use more outbacks and then sort of help you out in a little better way so when it comes to mortgages for those that have a mortgage that's above that 80 level and you're leaving 20 equity in the house whether you're doing it as a refinance or doing it as a purchase of 20 or 25 down there's lots of other options available some of the lenders that we work with will look at your income in a much more favorable fashion but there's a little bit of a trade-off where the rates might not be quite as low as what you expect and there might be a fear to involved in doing a mortgage like that but at least there's some mortgage lending out there where they'll look at your tax returns and your notice of assessments in a little bit better light when it comes to qualifying your income one thing that you have to have in line for pretty much all of this mortgage lending no matter what type of a mortgage you're going for whether it's less than twenty percent down or a mortgage refinance or at 80 then you have to make sure you demonstrate that your income taxes are fully up to date and paid so they're going to be looking at your notice of assessment and if there's a balance owing on the bottom of the page there showing that there's some money owing to revenue canada you're gonna have to provide some additional documentation showing that you paid that account up to date and that there's not anything on your current taxes for the previous year another thing that you have to have pretty much sorted out in order to get a mortgage for people who are self-employed is excellent credit if you have any credit difficulties in the past with credit cards or loans not even as bad as maybe a collection or anything like that even if you've got some spotty payment history you've missed some payments over the years it's just gonna make it that much more difficult for us to get you approved already being self-employed and maybe showing very low income on your tax returns your notice of assessment that's already enough of a handicap when it comes to getting a mortgage so we like to make sure your credit's in excellent shape so that we can find you the best mortgage possible that's about it for mortgages for those who are self-employed if you have any additional questions or comments please put them in the comments section below or feel free to contact me through my website i'm always happy to correspond with anybody who gets in touch with me and once again thank you so much for joining me on my channel and have yourself a great day

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