Mortgage options for the self-employed are not as easy as they once were in Ontario. Whether your an existing homeowner or looking to purchase your first home, being self-employed requires an experienced mortgage broker. Banks, credit unions and larger traditional mortgage lenders have changed their qualifications for business owners.
Self-employed mortgages in Ontario
Being self-employed does not mean you can’t get a mortgage, it simply means that you need to seek alternative options. There are lenders that understand what it means to be a business owner. At one point in time, it was enough to just say you were self-employed and a mortgage lender would approve you with minimal conditions.
Lender requirements have changed because government policy has changed. With stricter requirements set out for banks and other lenders, they are required to validate your income with a more traditional approach. This means having to supply documents that confirm your income traditionally like your income taxes.
What documents will I need to get approved?
A key to applying for a mortgage when your business for self is to get all your paperwork in order ahead of time versus last minute. Leaving it down to the wire often leaves anyone (self-employed or not) scrambling to find documents they have not filed away in a safe place.
Here’s a list of documents to have ready:
- Business License or Articles of Incorporation or Master Business License.
- 12-months of business banking activity to show your annual income.
- Copy of any monthly invoices that match up with the business bank account for 12 months.
- Business financials prepared by your accountant.
- Notice of assessment.
If more items are required you will certainly be made aware of that during your application. Those items help your mortgage broker secure the best possible financing solutions.
B lender: mortgage options for the self-employed
There are institutional mortgage solutions available to self-employed borrowers backed by competitive interest rates. Sub-prime B lenders programs are set up to meet the needs of many business owners. The nice thing is they do not require as many documents as a bank or A lender.
One concession a B lender is willing to make is on the cash revenue monthly. If your business is generating a ton of cash per month but you are not taking any that still confirms stable revenue.
Private lender: mortgage options for the self-employed
It is common for people that are self-employed to claim a lower income but wonder if there are still options to get approved. The simple answer to your question is yes you can. Sometimes it’s almost easier to secure a private mortgage with an accredited investor.
A private lender will rely solely on the property location, and loan to value. This option will afford you the opportunity to complete a refinance or home purchase to get started. You can then work with your mortgage broker to move up to a new lender in a year or two.
Private lenders understand that you may be in the start-up phase, claim a lower income because of various write off’s, or simply you operate a cash business. If you’ve got a sizeable amount of money to put down on a home this can work to your benefit.
Use a co-signer to get a mortgage
You can use a co-signer to help put a mortgage lender’s mind at ease about your affordability. When someone co-signs for a loan they take on the full responsibility of paying back the mortgage loan.
A co-signer is generally a close family member such as mom, dad or a sibling. They would be added to the title and have access to all details related to the mortgage and application. It is important to discuss why you need help with a co-signer so that they feel comfortable co-signing for you.
Bruised credit mortgage options for the self-employed
Maintaining your credit history when your self-employed is challenging at the best of times. Balancing the seasonality of your business coupled with your daily personal expenses is no light task. As a business owner, your credit can spiral downward very quickly; leaving you with an uphill battle to repair it. If you self-employed with bad credit and low income there are still unique mortgage options available.
You still have options but your credit score will dictate what options you have to choose from. A mortgage broker will be able to walk you through your options to help you understand what they are.
If your self-employed and not sure about your options call us at 1-855-242-7732 or apply online now.