With this article we will look at some common scenarios and solutions when looking for a mortgage as a self employed individual. You can also view the video here)

There are multiple ways and structures that self employed individuals use for paying themselves (salary, dividends, commissions, business income). First we will break down how the bank generally qualifies BFS income within these categories.

Salary (referring to a T4 from your owned corporation)-
Banks will look at the most recent 2 years of personal notice of assessments and T1 generals AND they will look at the last 2 years of corporate tax filings and financials to ensure that the corporation is able to sustain paying the salary (a healthy company).

Dividends (referring to dividends from your owned corporation)-
Banks will look at the most recent 2 years of personal notice of assessments and T1 generals AND they will look at the last 2 years corporate tax filings and financials to ensure that the corporation is able to sustain paying the salary (a healthy company).

Commissions-
Banks will look at your most recent 2 years of personal tax filings and notice of assessments to determine your average net earnings. In some cases the banks will look at “adding back” logical expenses that were deducted when applying your write offs.

Business income-
Banks will look at your most recent 2 years personal tax filings and notice of assessments to determine your average net earnings. In some cases the banks will look at “adding back” logical expenses that were deducted when applying your write offs.

 
With the above income structures, you must be able to show the bank that your income is stable AND that it will sustain payments for the amount of loan you are applying for. With this, you can still apply for a loan with as little as 5% down payment (assuming your credit is acceptable to the bank).

 
In the scenario where the income that you are showing does not qualify you for sustaining the amount of mortgage you are applying for you call under a category called Stated Income

With stated income, there are 2 options. Between 10% and 34.99% down OR 35% or more

If you are looking for a “stated income BFS mortgage” with as little as 10% down, you can do so if:
 

  • Minimum 5% down is from own savings
  • Other 5% can be gifted NOT BORROWED
  • Over 680 beacon score
  • Stated income is acceptable by the bank based on your industry (income must be logical)
  • minimum 2 years self employed
  • no bankruptcies, consumer proposals
  • no missed payments in last 12 months
  • no income tax arrears
  • Loan will be subject to CMHC fees

If you are looking for a “stated income BFS mortgage” with 35% down or more, you can do so if:

  • Down payment must be from own savings
  • NOT BORROWED down payment
  • Over 650 beacon score
  • Stated income is acceptable by the bank based on your industry (income must be logical)
  • minimum 2 years self employed
  • no bankruptcies, consumer proposals
  • no missed payments in last 12 months
  • no income tax arrears
  • must show 12 months savings in the bank (on top of down payment) to cover mortgage PIT (principle, interest and taxes)