Most people think that being self-employed means you can’t get a mortgage; we’re here to debunk that myth. The reality is that it is possible to get approved for a mortgage if you are self-employed; you just don’t see it happen as often. BUT this doesn’t mean it isn’t possible, especially here at Dominion Lending Centres NasaKasa. We specialize in arranging mortgages for business owners. Being business owners ourselves, we have been through a similar mortgage experience! Here are some tips we recommend considering when you are self-employed and getting ready to become a homeowner.
Most banks want to get the last two to three years of income documents to determine an average income. This doesn’t allow self-employed people to show their entire income for the qualification because expenses are not always factored, meaning you could qualify for much less. This seems to be the first struggle for business owners.
“Self-employed mortgage applicants usually have to meet a higher threshold of lender requirements to secure a mortgage loan” – Forbes.
Get your finances and documents organized because you need to establish your financial status more when you are self-employed. It’s not as easy as picking up a letter of employment from your HR manager, getting a pay stub, and bringing in your income taxes. Typically, lenders would rather see your accounts managed by qualified accountants, so you may need to rethink the strategy if you have been doing your accounting. It shows the lenders that there is credibility and that a professional is looking over the accounts. It’s an excellent time to get your bills and statements in order when you start thinking about looking for a home.
If you get paid cash for your business, we highly recommend depositing the funds into your business account; that way, you show deposits of income generated regularly. The lenders will also need proof of your self-employment in the form of either a master business license, GST registration, or articles of incorporation; you have to be mindful that your documents aren’t expired.
The more money you can put towards your down payment, the better. The more money you put down gives you more equity in the home, which shows the lender you are less likely to ditch the mortgage during more financially challenging times. The more you put down will also help lower your loan to value ratios. Doing this can help get you a lower interest rate, resulting in significant savings over the mortgage life. Additionally, aside from the down payment, showing considerable savings will also aid you in being approved for the mortgage.
Not everyone knows that all banks have different qualifications. You may get denied at one bank and approved at another. Don’t give up! Give us a call; one of our mortgage brokers would be happy to help.