Applying for a Mortgage When Self Employed

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There is one main challenge when applying for a mortgage when self employed.  The challange is how much to write off versus how much to declare as income.

 

Applying For a Mortgage When Self Employed

 

For those self employed, this question may arise each tax year.

From a mortgage application point of view, this question can make the difference between an approval and a decline. If approved, this question will help determine what you will qualify for.

For those self employed, a bank will typically use a two year average income from your line 150 from your Notice of Assessment or T1 General. The line 150 is your taxable income after deductions.

Learn more: Get a copy of your Notice of Assessment

When a person writes off a large amount of expenses, this can dramatically reduce the line 150 income. With that, it can affect the amount they would qualify for.

A soft calculation to know what average income you should be aiming for is to take the price of home you desire and divide it by 4.5.

In this example, a $400,000 house, would need an average income of about $89,000.

A full application of course will assist in determining your actual pre approval price or the income amount needed.

If the maximum purchase price that results from your Notice of Assessment income is not enough, then you can look to a gross or stated income program or to add a cosigner until the average is higher.

Learn more: Co-Signing for a Mortgage

For the gross income or stated income program a lender will look to use your gross income before deductions when applying for a mortgage when self employed.

Contact me today to learn more about applying for a mortgage when self employed.

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About Andrew Thake

Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.

Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.

Why not make your mortgage experience a comfortable one?

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