Self-employed mortgages: seven tips to help you qualify

Self-employed mortgages: seven tips to help you qualify

(upbeat music) – Self-employed? Seven tips to help you
qualify for a mortgage. While self-employment is
certainly common today, running your own business
can make getting approved for a mortgage more difficult. While minimizing your
net income is important to pay less tax, it works against you when it comes time to
apply for a mortgage. So as a self-employed
person, what can you do to ensure you have a strong application and improve your chances of qualifying? The first thing you'll need to do is provide income validation
to prove your earnings.

Validation documents can
include your previous two years' Notice of Assessment
or financial statements prepared by an independent third party. Some financial institutions
will also accept statements of business activity. The better your lender understands your financial position, the
more flexible they can be. Income validation is now
more important than ever. As of May 31st, 2014, the Canada Mortgage and Housing Corporation, or CMHC, will no longer provide insurance for self-employed mortgages without it. And for many, this insurance is required. Another way to help your application is to be organized and
present a clear picture of your financial situation. Ensure all tax deductions are supported by appropriate documentation. Filing your taxes on time
and paying moneys owed is also key. Consider your credit rating. Paying your bills on time and keeping your credit obligations clean
keeps your credit rating as high as possible. If you have any credit
issues, resolve them before you apply. Another thing to think about
is your debt-to income ratio. As your debt increases,
the portion of your income needed to service it increases, as well. Lowering your debt by perhaps paying off a few smaller loans may
help you get approved for a larger mortgage.


It's no secret that income for self-employed
individuals can fluctuate. Workload varies and there may be periods when income is reduced. Building two months or
more of cash reserves can cover these periods
and help you qualify. Keep in mind that credit
unions can often be more flexible than banks in
structuring your mortgage. Since we understand you incur
extra costs to earn income, we will typically add an extra 15% to your reported income when calculating your mortgage eligibility,
helping you qualify based on a more accurate picture
of your true earning power. We can explore options like extending your amortization period
beyond a 25-year term and we can use a longer
three-year average income when approving your application. We also strongly suggest you
build a long-term relationship with your financial advisor. The more we know about
you and your business, the better we can understand your ability to service your debt and get you the mortgage you deserve. (upbeat music).

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