"Securing a mortgage deal can take a bit of work and planning. There are three main factors when you are self employed Canadian. The process can be more complex but once you understand it, it is quite simple. Credit history, proof of more than 35% of down payment and notice of assessment from past 3years is must. There are other options but they will be lot more expensive" says Navtaj Chandhoke, founder, Professional Real Estate investors group (PREIG) Canada.
Good credit report
credit score are important factors in determining whether or not you will be approved. This is one of the factors mortgage professionals consider in qualifying you for a mortgage. The lender requires excellent beacon score possibly above 680 or more.
Canadian lenders will require mortgage loan insurance unless you can put down a down payment of more than 35 % . Insurers also recommend that lenders demand higher credit scores from borrowers stating their own incomes.
The simplest way for the self-employed to qualify for a mortgage is for the lender to look at your income on the Canada Revenue Agency notice of assessment for the past two years and see if you qualify for a mortgage.
Canada Mortgage and Housing Corp.
(CMHC) will allow self-employed individuals to increase the income on their notice of assessment by 15 per cent in order to qualify for a mortgage. This is a generally accepted increase to compensate for non cash items such as business use of the home.
For full details, visit their website at CMHC -schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Self-Employed.pdf.
CMHC will average your income from the past two years. If your income has been rising each year for the past four years or more, they will use the latest year for calculations. To take advantage of certain tax strategies, many self-employed may keep money in their business than generating income.
If you're unable to qualify based on your verifiable income, you can still obtain insured mortgage finance, but CMHC will charge you a higher premium. Since April, CMHC permits you to state your own income if you have been in business for less than three years.
Most of the Canadian lenders will require mortgage loan insurance unless you can put down a down payment of more than 35 per cent. Insurers also recommend that lenders demand higher credit scores from borrowers stating their own incomes.
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