Mortgages for the Self-Employed
December 28, 2015
Self-employed? Need a mortgage? Not too long ago, this was as easy as showing basic documentation of your tax filings and stated income. But regulations have kicked into the mortgage world since the 2008 crisis that significantly changed how the self-employed can obtain a mortgage.
There are a number of rules and tricks when obtaining a mortgage for the self-employed, and a number of lenders have varying policies that will allow you to take advantage of business expenses for example. This can be tricky for the unfamiliar, and when there are huge differences on the down payments required and rates available, it can be downright costly!
Fortunately, the GTA Mortgage Pros team is well-versed with mortgages for the self-employed and can guide you through the whole processes.
Typically, if you’re self-employed you would want to declare less income and increase business expenses and personal deductions to lower your tax amount. This is all legal, but unfortunately with the regulation in place since 2012, it will hurt you in the long run to declare less income. Using your stated income on your mortgage application can still be done, but it will require a downpayment of 35% to avoid having to obtain insurance. The best plan as of 2012 is to declare as much of your income as you are able to, because in the end you’re either paying it now in the form of taxes, or later in the form of debt.
If you have 2 years of provable income, there will be more available to you. You would come under higher scrutiny, being self-employed, but would be more able to get approved for a conventional or high-ratio mortgage. The best place to start for proving income in a mortgage application would be to produce the following:
Documentation showing self-employment can include a company website, business plan, expenses and income from the business accounts.
Some lenders will allow for you to take a portion of your business expenses and put it towards your stated income, which of course can help you lower your ratios and get closer to that 35% downpayment. There are other lenders who have programs for those who have had their own business for less than two years and are looking to purchase a home (falling into the category of not having a reliable, proven income for two or more years).
There are lots of options out there for a mortgage if you’re self-employed. You just have to know where to turn! Take time today for a painless 90 second application, and we’ll make sure you see the best options out there for the self-employed!