Do you have home-owning dreams, but unsure if you can get a mortgage because you are self-employed? Are you wondering what the mortgage requirements are for those who are self-employed? Don’t stress too much, there are answers to your questions.
What is a Self-Employed Mortgage?
A self-employed mortgage is an option for, obviously, the self-employed. It is either a mortgage on a commercial property owned by someone who owns a business or self-employed, or a residential mortgage on a regular home.
Self-employed persons have a different way of declaring earnings than salaried employees, so the net income isn’t always large enough for regular mortgage qualification.
What does a Self-Employed Person Need To Apply for a Mortgage?
- Most lenders will look for the last three years of self-employed income, although some may allow you to add some tax deductions. Have income tax returns for at least two years.
- Have to proof your personal taxes are paid and up to date. You can check this by looking at your Notice of Assessment and seeing if you have taxes owing.
- Bring statements outlining your business finances such as expenses, income and any debt. If you are incorporated, bring account and banking statements. This will show a source of additional revenue and may help you qualify for higher mortgages with lower rates.
- Personal banking statements show additional money going into your bank accounts. This can help qualify you for higher mortgages. The lender can calculate what your true income is and determine if you qualify for a mortgage, how much, and what interest rates can be offered.
- Have a copy of your business license and articles of incorporation. Most lenders will want to review these documents if your business is incorporated. You will need to be listed as an owner on your articles of incorporation.
- Contracts showing future income: A mortgage lender may even look at your expected future income. It will help to show you have work orders or sales contracts that you and your customer sign.
- You may have to have a credit check, depending on the lender you have. Most lenders who require a credit check usually offer lower or fixed rates than others. If your credit is good, perhaps see your lender can get you a self-employed mortgage. If you have less than perfect credit, you may want to look for a private mortgage lender.