Preparing for a mortgage application when self-employed

The self-employed dilemma

In 2015, Statistics Canada released a report to the effect that there were at that time about 2.7 million people with self-employed status in Canada. This is approximately 14% of the total population and the statistics reveal how this segment is continuing to maintain a significant lifestyle supported by their own efforts. However, this is offset by the fact that this income method is sometimes not easily accepted by lenders, such as in the case of a mortgage application.

There are certain criteria to meet when making an application for a loan to any conventional banking or other financial institution. It involves a determined measure required by lenders that the applicant for a mortgage must meet. It is at this initial stage that anyone who is considering a self-employed mortgage in Kitchener should seek the qualified experience of their local broker.

Amongst the documents a self-employed person must submit to the lender are tax returns for the previous two years. In this respect, the returns don’t always provide an accurate account of the actual take-home pay acquired by a self-employed person.

The paper path

Documentation related to tax deductions in connection with conducting business frequently includes a variety of expenditure. This can range from meals, rental for premises, as well as interest on credit cards and a lot more. It can affect the application for a self-employed mortgage in Kitchener by the income of the self-employed business owner showing a significantly lower figure than the actual take-home earnings. The contention then arises with the mortgage sum required not being supported or justified, by the stated net income.

Your experienced mortgage broker can advise you fully regarding submitting information concerning your income, such as writing off fewer expenses during the previous two years leading up to the property purchase. They can explain that although this can entail you paying more in personal taxes, it will raise your income and enable your mortgage qualification. There are lenders who prefer the applicant for a self-employed mortgage in Kitchener to have a self-employed income statement submitted by a professional instead of one created by yourself.

You can consult your mortgage broker on the question of “stated income” which is an option adopted by some lenders. It is founded on you having been in the same profession for at least two years prior to you becoming self-employed. It is only one aspect on which a qualified mortgage broker can render you valuable and sound assistance.