Being self-employed in Canada is a dream come true for many Canadians. It gives you freedom and flexibility to forge your path in your personal and professional life. You are in control of when you work, where you work, and whom you work with or for. With that freedom comes a lot of specific responsibilities. Because you’re are both employer and employee, you are now accountable for the finances of your businesses (savings/liabilities and taxes) as well as your own. Buying a home for self-employed Canadians can be an intimidating process for some because it does require answering a few more questions and producing a bit more paperwork. That’s why we are here to help!
Approximately 15-20% of Canadians are considered self-employed. Though this number is not the majority it is still a significant portion of the buyers market, and it is something we pay particular attention to in our office. So where do you start as a self-employed home buyer?
Get your paperwork in order. Lenders want to make sure you are organized and can manage both your business finances and your personal finances.
Speak to your accountant, or find a copy of:
- Financial Statements of your business (last two years)
- Proof that your HST and/or GST is paid in full
- A copy of your GST license or Articles of Incorporation
- T1 Generals (Sole proprietor)
You also want to make sure you have the personal financial documents for you and your co-applicant in order as well. A Notice of Assessment for the last two year showing you have your income taxes paid in full will be necessary. Every ‘A’ lender needs to know you don’t owe the Canadian Government any money before they can approve home financing, though we do have other options we can explore.
The next step is where working with a Licensed Mortgage Advisor is important. Every Self-employed home financing file is unique, and working with a professional team with expertise and lending options will always give you the best outcome.
First, we get to know your goal and your needs, then we get to know your financial status and run the numbers. All lenders have their particular list of criteria, programs, and conditions for how they view a self-employed application. It’s important that the person you are working with understands your Financial Statements clearly and can identify the lending and insurable options available. As a short example; some business owners don’t declare much income for themselves, giving them the opportunity to write much more off through the company. Though this is a substantial annual tax savings, this could make it difficult to qualify a borrower based on their income alone. Professional Mortgage Advisors can use the complete business financial picture and present a much more favourable and accurate account of your income to the lender. We can do this in a number of ways such as showing year after year growth, providing proof of contracts showing revenue, and in some cases using a Stated Income solution.
I won’t go to into depth on the Stated Income as there are some revisions to the program that promises to make it more accessible to future applicants. However, in a nutshell, the program is designed for Self-employed borrowers who are unable to provide traditional income verification but have a proven history of managing their credit and finances responsibly. If you have more questions or would like to learn more about this, please reach out to us at Jencor or Click Here to see the program’s guidelines.
Getting to the Finish Line:
After we get your paired with the best lender to finance your mortgage, the completion process becomes basically the same as any standard sign off process. You sign your documents with us, then you work with your Lawyer and Realtor to complete the property closing.
The key to this process is, remove doubt and let us know what you can do. True some lenders do not have an appetite for all Self-employed borrowers, but not at Jencor. We know our lender’s programs, and we know not to make them work for our clients. Licensed Mortgage Advisors are trained and educated to make this process as smooth and seamless as possible for borrowers in all situations. Our Advice is free, and we are available when you are.
Morgan Dempsey – Mortgage Advisor, Jencor Mortgage Corporation