Mortgage Blog

Self Employed Mortgages - What Documents Do I Need?

June 5, 2019 | Posted by: Brandi Pierik and Matthew Pierik - Red Deer and Calgary Mortgage Brokers

Self-Employed Mortgages – What Documents Do I Need?

When you’re self-employed and applying for a mortgage in Red Deer, you’re likely to face some obstacles when compared to someone who earns a regular salary through an employer.

But if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, your chances of being approved for a mortgage are greatly improved.

Statistics Canada reports there were 2.8 million self-employed Canadians in 2018. Numbers have been steadily increasing every year with the greatest rise in self-employed women at 15% and men at a 4% increase.

As a self-employed person, it’s in your best interest to minimize your reported income so you pay less tax. Unfortunately, this can work against you when it comes time to apply for a mortgage as income plays a large role.

Fortunately, there are special stated-income mortgage programs available for those who are self-employed and have a proven two-year history of responsibly managing credit and finances.

Under these programs, you may be able to borrow up to 90% loan to value – meaning the down payment can be as low as 10% of the purchase price, with at least 5% coming from your personal savings. The remaining 5% may be gifted by an immediate family member.

The income amount you’re stating has to make sense based on your business. Lenders and insurers are well aware of the tax write-offs that self-employed borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining traditional mortgage financing if they’re self-employed.

Required documentation
The exact documentation you must provide depends on whether your business is a sole proprietorship, partnership, or corporation.

In this example, let’s look at the documentation you’ll need when applying for a mortgage as a sole proprietor – a single owner who directs all business activities assumes all authorities and obligations and is liable for business debts.

Documentation requirements include:
- One of the following to confirm at least two years of self-employment: Business Licence; GST/HST Return Summary; T1 Generals with a statement of business activities attached for a minimum two years prepared by an arm’s-length third party; or Audited Financial Statements for the last two years prepared and signed by an accountant
- The most recent years’ Notice of Assessment to confirm the line 150 income amount and no income tax arrears

For incorporated individuals you will also need:
- Articles of Incorporation
- 2 Years Company Financials

If you have not been self-employed for a full 2 years, fear not! There are options available for your situation too!

Have questions about your Red Deer self-employed mortgage options, or your mortgage in general? Answers are just a call or email away! Contact Brandi Pierik of Dominion Lending Centres for your best Red Deer Mortgage Rates.

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