Being self employed has many benefits: you often get to make your own schedule, be your own boss, and approve your own vacation time! It may, however, present its challenges in regard to being approved for a mortgage (especially if you’re a first-time home buyer).
Wouldn’t Being Self-Employed Imply That I’m More Responsible? Duh.
Yes and no, but not in the eyes of the lenders.
This is for a few reasons:
Being self-employed makes you higher risk to lend to because you often don’t have the same protections as an ‘employee’ (employees generally have a consistent hourly rate and are guaranteed protections if they are terminated)
Individuals who are self-employed are often contractors who can be ‘fired’ from their contract at any time with no recourse for severance (which a regular ‘employee’ would receive). If you’re self-employed but NOT a contractor, you probably own your own business. Owning a business can also be high risk because once again, there is no guarantee on steady income (the economy may dive at any time and your business may fail)
The way you declare your income to the government differs from a person who is an ‘employee’ and receives basic T4 slips. This can sometimes lead to individuals committing mortgage fraud by fudging their numbers in hopes of getting approved by a lender
Luckily there are safeguards in place that a mortgage broker can help you with when applying for a mortgage when you’re self employed!
Great question!
If you’re self employed, there are some preparations you can make before applying for your mortgage that will show the lenders you are serious, reliable, and most importantly that you’ll be capable of paying off your debt:
In addition, having these documents readily available/submitted to your mortgage broker will help keep the process smooth:
The most important step to take if you are self employed and struggling for mortgage approval is to work alongside a mortgage broker who understands the industry and is aware of avenues that can be taken to get you approved.
Mortgage brokers who have knowledge of the lending industry can be creative and push for mortgage options like alternative B-lending, private lending, or even a stated-income mortgage!
If you’ve been denied a mortgage by a bank, don’t take it personally!
Banks follow very rigid protocols and are often unable to accommodate applications which don’t fit into their preconstructed boxes.
There are many differences when it comes to banks vs. brokers, and the main one is that a mortgage broker can assess your unique file and discover options that are more likely to get you approved as a self-employed borrower.
You work hard, you deserve a mortgage, and just because you’ve made the decision to be self employed does not mean you should be penalized for it. Let us help! We’d love to help you land your dream home by collecting the RIGHT information, completing the RIGHT applications, and negotiating for the BEST rates on your behalf.
If you have questions regarding your options or need professional assistance for securing your mortgage, reach out to myself, Kyle Benzies (licensed mortgage broker), and I’d be happy get you started on your home equity journey!
***other conditions may apply to anything listed above. The information provided on this page should NOT be implicitly relied upon, and may not be 100% up to date. It's best to contact us for the most current conditions/program offerings for alternative b-lending***