Business For Self Mortgage
“Getting A Handle On Business For Self Mortgages”
The self employed mortgage market or business for self as its come to be known, is a continually growing segment of the overall mortgage market as more and more people move to self employment either by choice or through force via layoffs, downsizing, etc.
In recent years, the banks and other institutional lenders made a considerable play towards securing more of this available market share with mortgage programs that could be qualified for without a great deal of proof with respect to your ability to repay.
That has changed significantly with mortgage rule changes tightening up on business for self mortgage programs causing some of the main line lenders to either significantly revamp their programs or drop them completely.
Much has been written about all this and how it is now more difficult and potentially more costly to get a self employed mortgage, especially if you are relaying heavily on a stated income approach.
While the rule changes will continue to cause some transitional problems for some, lets focus in for a minute on the essence of the rule changes.
The reasoning for tightening up mortgage requirements for the self employed was that the financing being provided at times was not always reasonable with a borrower’s ability to repay the mortgage, or it at least wasn’t very clear.
Matching borrowing risk to lending decisions is important to the borrower, the lender, and the industry as a whole.
So any changes that are made that move towards being able to more accurately assess risk is likely going to help protect this form of lending for the long term.
With stated income mortgages there is now a greater requirements to 1) prove you are making the money stated, 2) prove that a history of this type of earnings cash flow exists, and 3) prove that what you’re making now will continue into the future.
Lenders are also looking at industry statistics related to what different occupations make to better gauge what a reasonable range would like be if income cannot be fully verified.
So, yes, there is now a greater burden of proof on the self employed borrower to support their income claims. This can also be done through a variety of different ways that will depend on your specific business and the work you are preforming. For instance, active contracts and outstanding purchase orders are further support of on going cash flow. Business financial statements including accounts receivable details can further build the case.
While the lender focus is typically going to be related to the money you took out of your business, the overall business performance is still going to be important.
Bottom line is there is more work involved in getting the best rates possible for business for self mortgages and some of this additional work can translate into more record keeping and forms of disclosure that help support your application.
With some additional work to better prove your earnings, lower rates are still available which makes the process of getting the lender more comfortable with your stated numbers worth it in the long run.
If you’d like to better understand your self employed mortgage options as well as get some expert assistance in building an effective financing package, then I suggest that you give me a call so we can go over your situation together and discuss the different approaches you can take.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel