Self Employed Mortgage
Mortgages for Self Employed – Finding Viable Options
About one out of every five income earners in Canada are self employed. This is a fairly large demographic, and the statistics suggest it is continuing to grow. This promotes any self employed person to ask why it is so challenging to obtain mortgages for self employed workers through charter banks. The reason is because business owners who work for themselves subtract expenses from extra income, which is not something many banks recognize. What you need if you are looking for mortgages for self employed workers is a lender that will look at your credit history rather than a combination of your business finances and taxes.
All mortgages for self employed workers require proof that you have been self employed for three years or more. One great product that you might find works best for you is something called a low documentation, or low doc, mortgage. This applies if you are purchasing a new property or refinancing your current home as much as 90%. If you are refinancing, you will need its value appraised so you know what 90% of its value is. No proof of income is mandatory to qualify for this mortgage as your approval is based on your credit score, not your net worth. You then of course need a good credit history to qualify.
No income mortgage is another of the mortgages for self employed people that may interest you. With this option, your credit score can be less than perfect and you can still qualify for the refinancing of your home up to 75% of its value. If you can put 25% down or you have 25% equity on your home, you can obtain a mortgage with practically any financial situation. Otherwise, you can put down as low as 5% and obtain a mortgage but it has to be insured through CMHC, G.E or AIG for the lenders to feel comfortable to lend on a no income verified mortgage.
You should understand that the better your credit score is, the better interest rate you will have access to with mortgages for self employed people. This is true in most loan situations. While sometimes net income is taken into account as well, credit history is always an important aspect in determining interest rates on loans. Remember, though, that while good credit is advised in every loan situation, it is not required to be able to obtain a self employment mortgage. Also understand that to qualify your property must be in or close to a main center.
We understand self-employed individuals have experienced challenges in obtaining the proper financing in the past. At Syndicate Mortgages, we recognize the growing number of entrepreneurs within the marketplace and will work hand in hand with our clients to become their self employed solution. Nearly 20% of Canadians are now self-employed a number which is continuing to grow. This means that lenders have in turn opened many doors to make the mortgage process easier and more efficient.
A conventional self-employed mortgage requires a 35% down payment, whereas a high-ratio mortgage, insured through CMHC or Genworth Financial can be possible with as little as 5% down.
Here are some guidelines to keep in mind when applying for a self-employed mortgage:
- 2-years self-employed tenure is recommended, however we will consider borrowers with less than 2-years BFS tenure depending on the length and type of previous employment.
- One form of written third party documentation confirming self-employment tenure must be on file
- Lender is required to capture the borrower’s “Stated” income and submit to as part of the application.
- The “Stated” income should be reasonable based on the type and size of the business, and should be able to service the required mortgage.
- Reasonableness of the income is a critical factor in the approval of the loan as is the borrower’s ability to service the loan and all other obligations.
- Self employed insurance premiums can range anywhere from 0.80% to 6.40% (which is included into the mortgage amount).
If you would like to receive a free quote contact us to speak with a mortgage professional today!