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Expert advice on applying for a self-employed mortgage

You’re self-employed, so you know what it takes to stay motivated and get things done. You also know how to take control of your financial future and work for the things you want. Unfortunately, some of the smart tax-planning strategies that make you a successful entrepreneur, like keeping your personal income low, might work against you when you apply for a mortgage. The good news is that many financial institutions, including Meridian Credit Union, have flexible options to help hardworking entrepreneurs buy the home of their dreams.

Options for self-employed mortgages

Some of your self-employed friends might suggest that you contact a private lender. They’ll tell you that with a private lender you'll probably have to pay a higher interest rate because your self-employed income won't meet the lending criteria demanded by most banks, especially when they apply the new mortgage stress test. Before you look for alternative financing, talk to a qualified mortgage specialist about your options.

“We welcome business owners with proven track records. They have demonstrated their ability to work hard and generate income. That kind of drive is something we want to recognize and reward,” says Heather O’Hare, a Mobile Mortgage Specialist at Meridian. Here’s some practical advice from Ms. O’Hare and her team for self-employed Canadians planning to buy a home.

Get pre-approved

Pre-approval means that you’ll go through some of the steps necessary to get a mortgage without actually borrowing the money. You’ll know how much you can borrow, which type of mortgage is right for you, and the amount of your payments. Learn more about mortgage pre-approvals.

Organize your paperwork

Every mortgage application requires documentation to confirm your income and credit rating. If you’re self-employed, here’s what you’ll need to help your mortgage specialist calculate the amount you’d be eligible to borrow:

  • Your two most recent personal income tax returns, including all relevant schedules.

  • Your past two Notices of Assessment from the Canada Revenue Agency.

  • Three months of business bank statements.

  • Confirmation that HST and source deductions are current, if you have a sole proprietorship or partnership.

  • Your past two years of accountant-prepared financial statements, if you have a limited or incorporated company.

Understand how your income is calculated

It’s understood that your income may vary when you’re self-employed. Therefore, your income is calculated by taking the average income of the past two years or the income of the most recent year, whichever is lower. If you want your application to be based on other forms of income, like investments or trusts, bring supporting documents. Your mortgage specialist will help you determine whether they qualify as proof of income.

Make sure you can verify your down payment

The amount of your down payment will need to be confirmed by bank statements from the previous 90 days. If part of your down payment is a gift, you will also need a letter including confirmation of available funds.

Most of all, get good advice

Armed with the right information and documentation, you'll be ready to make your dream home a reality. Talk to a Meridian Mortgage Specialist about all the options to open to self-employed Canadians and let us help you make an informed decision