Antonietta Gaudet Mortgage Professional
Self-Employed
Mortgages for Self-Employed/Business for Self (BFS)
Over 50% of all new mortgages in Canada are now arranged through a Mortgage Broker. If you own your own business, you may have a more difficult time obtaining financing for your real estate purchases.
Over the last year, it has gotten even more difficult. Canada Mortgage and Housing Corporation (CMHC) raised the required down payment amount, as well as decreased the percentage at which you can refinance an existing mortgage if you’re self-employed. Still, if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, your chances of being approved for a mortgage are greatly improved.
There are essentially two types of self-employed or business-for-self (BFS) borrowers - those who can prove their income and those who cannot, and must instead use a stated-income mortgage product. By providing the required documentation, you’re much more likely to be approved for a mortgage if you qualify based on your income. The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders.
Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining mortgage financing if they’re self-employed.
Canada Mortgage and Housing Corp. (CMHC) offers default mortgage insurance for BFS clients through a stated-income mortgage product up to 95% loan to value (LTV), so the down payment can be as low as 5% of the purchase price. However the income has to make sense based on the occupation. If the mortgage is CMHC insured the chances of finding lenders to fund this type of deal are significantly increased.
Getting Pre-Approved
While BFS mortgage financing is viewed on a case-by-case basis, if you work with a licensed Mortgage Professional to obtain a pre-approval, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.
It’s important to note, however, that there is a significant difference between being pre-approved and pre-qualified.
In order to obtain a pre-approval, the lender fully underwrites the deal whereas, with a pre-qualification, only the most basic details are considered. Remember that many banks will only issue a pre-qualification.
Alternative Financing
If you do not qualify for traditional financing all is not lost, since you may be eligible for alternative – or private – funding.
Mortgage Professionals often have access to private investors who are willing to lend money to BFS individuals looking to obtain mortgages.
Although you will pay a higher interest rate – on average about 10% – this route may enable you to acquire funds to purchase a home. It may be you only require private funding for a year until you can proof your income or improve your credit.
While there is now broad recognition that self-employed Canadians are an excellent and reliable customer group, the rates and options are always best when risk is lowest. It makes sense to find an experienced Mortgage Professional who can customize a mortgage plan to meet your short term needs as well as your long-term financial plans.
Give me a call to discuss your options and the products available to you!
Give me a call or text!
Over the last year, it has gotten even more difficult. Canada Mortgage and Housing Corporation (CMHC) raised the required down payment amount, as well as decreased the percentage at which you can refinance an existing mortgage if you’re self-employed. Still, if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, your chances of being approved for a mortgage are greatly improved.
There are essentially two types of self-employed or business-for-self (BFS) borrowers - those who can prove their income and those who cannot, and must instead use a stated-income mortgage product. By providing the required documentation, you’re much more likely to be approved for a mortgage if you qualify based on your income. The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders.
Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining mortgage financing if they’re self-employed.
Canada Mortgage and Housing Corp. (CMHC) offers default mortgage insurance for BFS clients through a stated-income mortgage product up to 95% loan to value (LTV), so the down payment can be as low as 5% of the purchase price. However the income has to make sense based on the occupation. If the mortgage is CMHC insured the chances of finding lenders to fund this type of deal are significantly increased.
Getting Pre-Approved
While BFS mortgage financing is viewed on a case-by-case basis, if you work with a licensed Mortgage Professional to obtain a pre-approval, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.
It’s important to note, however, that there is a significant difference between being pre-approved and pre-qualified.
In order to obtain a pre-approval, the lender fully underwrites the deal whereas, with a pre-qualification, only the most basic details are considered. Remember that many banks will only issue a pre-qualification.
Alternative Financing
If you do not qualify for traditional financing all is not lost, since you may be eligible for alternative – or private – funding.
Mortgage Professionals often have access to private investors who are willing to lend money to BFS individuals looking to obtain mortgages.
Although you will pay a higher interest rate – on average about 10% – this route may enable you to acquire funds to purchase a home. It may be you only require private funding for a year until you can proof your income or improve your credit.
While there is now broad recognition that self-employed Canadians are an excellent and reliable customer group, the rates and options are always best when risk is lowest. It makes sense to find an experienced Mortgage Professional who can customize a mortgage plan to meet your short term needs as well as your long-term financial plans.
Give me a call to discuss your options and the products available to you!