Self Employed Mortgage Questions
“Here Are The Most Common Questions We Get About Self Employed Mortgages”
Self employed mortgages are a significant segment of the residential mortgage market.
And over the last number of years there have been a lot of changes take place in how lenders approach this market creating a certain amount of confusion at times among existing and/or potential borrowers.
To make more information available to self employed individuals, we decided to list out the most commonly asked questions we get over and over again about self employed mortgage qualifying.
These are not listed in any type of order.
And there are certainly a lot more questions asked on the subject, but these are the most common ones.
What Are The Main Things I Need To Provide To Qualify For A Self Employed Mortgage?
The key things to qualify are all about the paper work.
The more detail you can provide to support your business existence and earnings the better.
Items like articles of incorporation, shareholder resolutions and agreements, business financial statements, personal income and net worth, and so on are going to be important to building your case for eligibility.
And if income verification is not straight forward, all the more reason to provide a comprehensive income package to the lender right at the time of application.
Because self employment can take on many different forms, its always good to provide as much detail as possible to give the lender sufficient background information to make a decision in your favor.
“Can I Qualify For Mortgage Insurance If I’m
Self Employed?”
Yes, self employed mortgages can qualify for mortgage insurance.
In fact, the mortgage insurance companies have programs specifically designed for the self employed.
More specifically all mortgage insurance programs for self employed individuals fall into two categories, namely income verification and stated income.
Income verification works similar to employed mortgage programs in that the verification is specific to income you report personally for income tax to the Canada Revenue Agency.
Stated income is used when there is not enough personal income declared to meet the debt servicing requirements of the lender’s program.
“Is There Any Difference In Interest Rates And Terms?
There is no difference in interest term offerings for self employed mortgages.
You can get either a variable or fixed rate term provided that you can qualify for them, just like an employed person would have to.
Where there can be a difference is in the premium you may be required to pay for an insured mortgage depending on what type of program you qualify for.
For instance, an income verification program will have a lower mortgage insurance premium than a stated income program.
“How Do I Verify My Income?”
The income verification process is about what you have taken out of your business personally to live on.
So the focus is on your personal income tax return and the notices of assessment provided by CRA once your return has been processed.
Because business results can vary from year to year, which can also influence the funds you take out of your business, a lender could also look at a three year average of personal income to get a better picture of what the average available cash flow for debt servicing actually is.
What Are The Keys To Acquiring
A Self Employed Mortgage?
One key to securing a self employed home mortgage is the manner in which the application is put together and submitted to targeted lenders with relevant programs for your particular requirements.
A complete and thorough application should include as much information about your business as possible so the lender can quickly get comfortable with your financial background and ability to repay the mortgage over time.
Because we are talking about self employed, the lender may not understand the business and any confusion or doubt can lead to a decline.
One of the ways to properly assemble an application package that increases the likelihood of a positive result is to work with an experienced mortgage broker who can outline all the relevant information that should be included for your particular situation.
A mortgage broker with experience securing mortgages for self employed individuals can be a valuable asset to getting the financing you’re looking for.
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