Can you qualify for a mortgage
when you're self-employed?

In Greater Vancouver more and more of us are self-employed. Small businesses (firms having fewer than 50 employees, including self-employed individuals) account for 98 per cent of all businesses in BC.

"Micro" businesses (with fewer than five employees) make up 81 per cent of all businesses. The Vancouver Board of Trade reports that 80 per cent of all members are small businesses.

Often one of the first goals of a business owner is to buy their own home.

Mortgage lenders at banks and credit unions consider you to be self-employed if you:

• run a business alone (as a sole proprietor), with a partner, or as a corporation;
• receive 25 per cent or more of all income from the business;
• work on short contracts for different employers; or
• are solely paid by commission.

If you receive a regular pay cheque from your employer or you receive two or more pay cheques for regular part-time work you do for more than one employer, you are a salaried employee.

Typically mortgage lenders evaluate salaried and self-employed borrowers in the same way:

• how much is the down payment; and
• does the borrower have the ability to make the mortgage payments?

Salaried borrowers verify gross income by showing past pay cheques or through a letter from their employer which documents their salary.

Self-employed borrowers verify net income or what remains when business deductions are subtracted from gross earnings.

Self-employed borrowers need proof that they have a viable business and a good credit rating. The financial institution who is qualifying you for a mortgage will check to see if you make regular rent payments as well as payments on car loans and credit cards.

You will also be asked to provide two years of bank statements, your tax return, your business balance sheet, profit-and-loss statements, assets such as stocks and bonds, and credit references. You may even be required to show that your particular industry is growing.

Your Royal Pacific REALTOR® can provide you with all the information you need about buying a home as a self-employed individual, including how to shop for the best mortgage rates.

Contact us, we'd love to hear from you!

For more information on this article or how we can help you with your real estate needs, contact your Royal Pacific REALTOR® at 604-266-8989 or use our online form for 24/7 service Contact us