Are you self-employed in Oakville and looking to get a mortgage? You may think that you can easily get a mortgage as a self-employed individual. Nevertheless, getting a mortgage isn’t as intimidating as you think as a self-employed individual. You can qualify for a mortgage if you meet certain requirements. Consulting an Oakville mortgage broker like Patrick Romann will always help you when you have mortgage concerns.
Credit Score and Criteria
You will need to have a good credit score to get a mortgage from a suitable lender. Still, the criteria to apply for a mortgage differs for self-employed or an employee in Oakville. If you meet the following conditions, you may qualify for a mortgage:
- Self-employed for at least two years
- Provide your full tax returns
- Provide your notice of assessment with proof of your business income
Slight variations exist to the above conditions to qualify for a mortgage. For example, you will need to show extra documentation as a sole proprietor alongside T1 tax returns.
How Lenders Evaluate Sel-Employed or Salaried Employees for a Mortgage
Mortgage lenders consider base salary rates when giving mortgages to salaried employees. It’s also a straightforward process, even if you start your new job. Nevertheless, lenders may consider your current salary once you’re off probation period.
Contrarily, lenders find self-employed individuals riskier than salaried employees for granting mortgages. Self-employed individuals take some time to start generating a steady income from their business. Hence, most lenders will consider your income for the first two or three years to consider your mortgage application. Proof of a steady income convinces a lender your business has stability; thus, he may grant you a mortgage.
Mortgage Application as a Self-Employed Person
The mortgage application process is different for self-employed or salaried employees. Lenders won’t simply be happy with your word for how much you can make; they will want proof. Typically, mortgage lenders will ask you to show a recent letter of employment and a payslip as a salaried employee. Then, you can request your human resource department to issue you the letter that you may receive within two business days. Moreover, you will also need to have the most recent payslip in your hand.
To apply for a mortgage as a self-employed person, you will need to show more documentation. Mortgage lenders can understand the business of self-employed people better with more documentation. Thus, they ask for it, as per an Oakville mortgage broker. The mortgage lender will want to see the following documents to grant a mortgage:
- Past two years tax returns
- Notices of assessment from the CRA
- Corporate financial statements of the previous two years if your business is a corporation
- Bank statements
- Invoices
- Contracts
- HST/GST returns
- Business License
If the lender finds your business health while reviewing your documents, you will qualify for a mortgage.
Can You Get a Mortgage without Two Years of Tax Returns?
Typically, mortgage lenders will consider your mortgage application if you have proof of two years of tax returns. If you don’t have it, lenders may still grant you based on your situation. For example, you were an employee in a consulting firm previously and started your company with the same business. In that case, a lender may consider your mortgage application and grant your mortgage with only one year of tax returns
Paying Yourself Too Little
Another issue you can face is not claiming enough income on your tax returns to qualify for a mortgage. How much income you’re claiming on your tax returns matters to lenders. Hence, paying yourself a small salary won’t impress lenders to grant you a mortgage. You must understand your concerns to acquire a mortgage suiting your needs. The right thing to do is to hire a credible mortgage broker to make sure you get a mortgage with the best rate.
Conclusion
Are you self-employed and looking to get a mortgage? Consulting an Oakville mortgage broker can help you if you have mortgage concerns. A good credit score is a need to acquire a mortgage on the best terms from a suitable lender. Nonetheless, there are certain conditions you need to fulfill to earn a mortgage as a self-employed individual, mentioned below:
- Self-employed for at least two years
- Provide your full tax returns
- Provide your notice of assessment with proof of your business income
A lender will likely grant you a mortgage if your documentation proves your business is healthy.
