In 2015 there were approximately 2.7 million self-employed individuals in Canada.
There are many benefits with being self-employed such as pay for performance, flexible working hours and write-offs however sometimes those write offs can affect buying a house when a lender is looking at your two year average net annual income for your Notice of Assessments.
With the right planning you can make qualifying for a mortgage while being self-employed easier.
Mortgage Tips for self employed individuals:
Reduce your deductions in the years leading up to buying a house. This will help increase your Line 150 from your Notice of Assessments and therefore increase your average income that a lender will use to qualify you.
Keep an eye on timing. If you are planning on taking time off work, maternity leave, traveling, parental leave and so on, this could reduce your average income.
Have your taxes completed by a certified accountant instead of doing them yourself. Maybe lenders will use the T1 Generals if prepared by an accountant to show them a better snapshot of your income and expenses.
Talk to your mortgage broker about self-employed programs. Although some traditional lenders have moved away from stated income programs, there are still some great programs available with other banks and lends. More options are important when it comes to self-employed individuals. With stated income mortgages a lender can look more to your gross income instead of your income after deductions.
Increase your down payment or add a second mortgage. With 20% down a lender will not typically need to follow the mortgage insurer’s (ie CMHC) more ridged guidelines and this may allow you more flexibility.