Why it’s harder for self-employed to get a mortgage

February 10, 2016 | Posted by: Natalie Wellings

Here is a fantastic article from theStar.com explains the ins and outs of getting a mortgage if you're self employed.

Alberta has a large number of entrepreneurs and, consequently, I get a fair amount of inquiries from self employed people trying to obtain a mortgage. Here are some tips to improve your odds of getting the mortgage you've applied for:

1. Be organized: You'll need to provide your full tax returns (T1 Generals) for the last two years that detail your expenses and writes offs  (called the Statement of Business Activities). I often talk to applicants who can't locate their tax returns because they have been misplaced. This will delay your file unnecessarily. 


2. Pay your taxes: It is important to be up to date and not show any unpaid tax arrears. If you do happen to have a balance owing, ensure that you have the funds to pay the amount owing in full as this will be a requirement of funding your mortgage.


3. Down payment: I have had several inquiries from self employed people who do not have a down payment. If you are self employed you need a down payment. You'll need a MINIMUM of 5% down if you can prove your income via your tax returns for the last two years and a 10% MINIMUM down payment if you cannot prove your income.


4. Credit: If you are self employed and are buying a house with only 5 or 10% down you need to have good credit.


5. Length of time in business: Generally speaking, most lenders and mortgage insurers want to see that you have been in business for a minimum of 2 years to show you have a track record of steady earnings. If you just started a business a month ago, you probably will not be able to buy a home for a little while unless you have a much larger down payment (15% or more).


Buying a house and qualifying for a mortgage when you're in business for yourself requires a bit more patience and pre-planning than it does for the average home owner but it is certainly not impossible. If you have any questions regarding obtaining a mortgage when you're self employed please contact me.

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