Mortgages for the self- employed in BC: how to simplify the process
If you're self-employed in BC, Canada, securing a mortgage can often seem more complicated. It hasn’t always paid to be self-employed if you’re employing creative accounting strategies but we understand you because we’re self-employed ourselves! With the right approach and the help of a knowledgeable mortgage broker, you can navigate the process successfully and secure the funding you need to buy your dream home in Victoria or elsewhere in BC.
Working with a mortgage broker is extremely helpful for self-employed individuals because it can be challenging to demonstrate income and financial stability without the traditional pay stubs and other documents that salaried employees provide. A mortgage broker can help you find lenders who understand the challenges facing self-employed borrowers and can work with you to find the best mortgage solution for your needs.
One of the benefits of being self-employed is that you have more control over your income and work schedule than traditional employees. However, this can also make it more challenging to demonstrate your financial stability to lenders. To address this, lenders will typically ask for additional documentation to verify your income, such as a history of T1 Generals, Notices of Assessment or sometimes bank statements. It really comes down to the individual.
If you're self-employed and looking to secure a mortgage in BC, here are some tips to help you navigate the process:
Choose the right mortgage broker: Choosing the right mortgage broker is essential for self-employed borrowers. Look for a broker who has experience working with self-employed individuals and who understands the unique challenges facing this group. Unlike banks, we have access to a wide range of lenders and products so you know you’ll be getting a good deal. We work with many self-employed people (incorporated and not) and know of little tips to make the file the most desirable for the lender. There are often special products at different lenders for self-employed people, which is why it is important to work with a mortgage broker so that they can shop around for you to find the right product to suit your needs.
Get your finances in order: Before you apply for a mortgage, it's essential to get your finances in order. This means working with a mortgage broker to review your file, employment situation and credit score. During this process, the more documentation you provide up front, the more prepared you will be in when the time comes to purchase or refinance.
Be prepared to provide additional documentation: As a self-employed borrower, you may need to provide additional documentation to demonstrate your income and financial stability. As mentioned above, these documents could include your full T1 Generals, Notices of Assessment and in sometimes incorporation papers, business financials, bank statements, etc. This can sometimes come up after you’ve made a successful offer but varies case by case.
Make sure your previous taxes are paid: Lenders will want to see a zero balance on your previous Notices of Assessments. Postponing payments of these types of things make it a lot more challenging to secure financing. If you’re considering a refinance, it is also important that your property tax payments are up to date as well.
Manage your debt: It can be easy for your debt levels to rise when you’re running a business, however it is important to keep on top of it because high debt can negatively impact the mortgage amount that you qualify for. Keeping your balances significantly lower than your limits and keeping your payments on time can go a long way to keeping your credit score high and your debt down.
Consider a co-signer: If you're having trouble securing a mortgage on your own, consider getting a co-signer. A co-signer is some close to you whose income and liabilities get added to your file for qualification. They also go on title and the mortgage and this can help increase your chances of getting approved for a mortgage. One or two co-signers can be very helpful, even if they don’t own their own homes outright or don’t have high incomes. It’s a good idea to check with your broker to see how a potential co-signer would improve your file.
In conclusion, securing a mortgage while being self-employed in BC, Canada is easier than you think it is. Working with a knowledgeable mortgage broker who understands the unique challenges facing self-employed borrowers can help you find a product that works for you and help navigate the process successfully. Reach out to us to see what you would qualify for!