Can You Get a Mortgage With a Self-Employed Status in Canada?

You're a freelancer, small business owner, or self-employed mortgage in Canada, and your business is doing great.

Now, you're ready to buy your own home. But there's one question on your mind: "Can I get a mortgage if I'm self-employed?"

Let's be honest – getting a mortgage when you're self-employed is a little more complicated than it is for people with regular 9-to-5 jobs.

But here's the good news: it's possible. While you might have to jump through a few extra steps, thousands of self-employed Canadians successfully get mortgages every year.

Keep reading to learn more.

What is a Self-Employed Mortgage in Canada?

A Self-Employed Mortgage Canada is a home loan designed for people who work for themselves. Unlike traditional employees, self-employed individuals do not have a fixed salary. Lenders consider your business income when deciding if you qualify for a mortgage.

Challenges to Get Mortgage for Self-Employed Borrowers

Self-employed borrowers face extra challenges, such as:

• Fluctuating Income: Your earnings may not be steady.
• Strict Income Proof: Lenders require more documentation.
• Higher Down Payment: Some lenders may request a more significant down payment.
• Higher Interest Rates: Some lenders consider self-employed borrowers a higher risk.

Self-Employed Mortgage Eligibility in Canada

To qualify for a mortgage for self-employed, you must meet specific requirements:

• Be self-employed for at least two years.
• Show proof of income through tax returns or business financials.
• Have a good credit score.
• Provide a down payment (at least 5% for homes under $500,000).
• Demonstrate business stability.

Self-Employed Income Verification

Lenders need to confirm that you can afford the mortgage. Here's how:

• Notice of Assessment (NOA): Your tax documents for the last two years.
• T1 General Forms: Proof of declared income.
• Bank Statements: To show steady cash flow.
• Business Financial Statements: Lenders may check the performance if you own business.
• Income Documentation for Self-Employed: Any additional proof that supports your earnings.

Know Self-Employed Mortgage Process

Applying for a self-employed home loan in Canada involves a few key steps:

1. Check Your Credit Score: A high credit score improves your approval chances. Aim for at least 680.

2. Gather Income Proof: Prepare tax returns, bank statements, and other required financial documents.

3. Get Mortgage Pre-Approval: A mortgage pre-approval for self-employed helps you understand how much you can borrow. This step is crucial before house hunting.

4. Choose a Lender: Traditional banks have strict rules. Consider alternative mortgage lenders who specialize in self-employed mortgages.

5. Submit Your Application: Provide all necessary documents and apply for the mortgage.

6. Wait for Approval: Lenders will review your income, credit score, and financial history.

What are the Self-Employed Home Buyer Tips?

Buying a home as a self-employed person can be easier with these tips:

• Keep Clean Financial Records: Maintain clear tax and income records.
• Save for a Higher Down Payment: This improves approval chances.
• Work with a Mortgage Broker: A broker can help you find lenders that cater to self-employed borrowers.
• Explore Self-Employed Financing Options: Consider different loan programs.

Can You Get a Mortgage with No Traditional Income?

Yes! Even if you don't have a regular paycheck, you can still qualify using alternative income verification methods. Some lenders offer mortgages based on bank statements or gross business revenue.

Canada Mortgage Rules for Self-Employed

Canadian lenders follow specific rules:

• Minimum Down Payment: 5% for homes under $500,000, 10% for homes between $500,000-$999,999.
• Stress Test: You must prove you can afford the mortgage even if rates rise.
• Self-Employed Mortgage Approval: Lenders assess your ability to repay.

Mortgage with No Traditional Income – Alternative Options

If you don't meet the standard mortgage requirements, consider these options:

• Stated Income Mortgages: Some lenders accept stated income instead of traditional proof.
• Private Lenders: These lenders have more flexible rules.
• Mortgage Refinance: If you already own a home, refinancing can help you access funds.

A mortgage broker connects you with lenders who understand self-employed borrowers. Check out the role of a mortgage broker vs. direct lender to see which option suits you best.

Final Thoughts

Getting a self-employed mortgage in Canada is possible with the proper preparation. Keep good financial records, improve your credit score, and explore different lenders. 

While the process might be a bit more complicated than for those with traditional jobs, there are plenty of options to explore. 

If you're looking for the best mortgage rates in Canada, LendingHub can help you find the best options!