SELF EMPLOYED BORROWER - Verified Vs. Stated Income
As a small business owner, in case you don’t already know; you are measured against a higher bar when obtaining mortgage financing. In order to qualify for traditional mortgage financing you must meet all the following criteria:
- Strong credit profile with good repayment history for a minimum of 2 years.
- Minimum 2 years income taxes filed with business income, either in-corporated, sole proprietor or partnership via 2 years Notice of Assessments (NOA) and either 2 years T1 Generals with Statement of Business Activity OR 2 years Accountant Prepared Business Financials along with a Business License or Incorporation Certificate.
- Proof that your personal income tax is paid up to date.
If you meet the above criteria, we can review your mortgage options under two different programs:
Verified Income Mortgage for Self Employed Borrower (Minimum 5% Down Payment)
Verified Income is calculated by taking a 2 year average of your taxable personal income (eg. 2 yr average of line 150 on your Notice of Assessment). In addition to the 2 yr average income calculation there may be additional income that may be applied to your situation
- Gross up your income on Line 150 of your tax return by 15% - Sole Proprietor
- Gross up your income on Line 150 of your tax return by 15% - T4 (incorporated salary)
- Remove Installment loans (eg. auto loan) from debt ratios with confirmation payment is taken from a business bank account.
Stated Income Mortgage for Self Employed Borrower (Minimum 10% Down Payment from own resources)
If you meet the above criteria and you are unable to qualify under the Verified Income Program above, if you have a minimum of 10% down payment from your own resources, you may qualify for a Stated Income Mortgage. Stating your income may allow you to qualify for a higher mortgage amount.
For example, using the Stated Income Program, if your verifiable income via your tax return is $50,000* from Line 150, you may be able to State your income at $80,000* to qualify for a mortgage. Keep in mind that in addition to meeting the above criteria, the amount of income you are stating has to also pass a reasonability test based on your Business Gross Revenue, your current assets & your line of work
Additional Fees/Insurance premiums will apply to a Stated Income Mortgage.
*numbers used are for example purposes
As your Axiom Mortgage Broker, I am happy to work with you to determine the best mortgage solution based on your personal situation.