Obtaining a self-employed mortgage in Peterborough, ON, is possible, but it comes with some specific requirements compared to traditionally employed individuals. Here's a breakdown of what you need to know:

Key Challenges for Self-Employed Mortgages

• Income Variability: Lenders often see fluctuating income as a higher risk.
• Documentation: Without T4 slips, demonstrating consistent financial stability can be more complex.
• Tax Write-offs: While beneficial for tax purposes, extensive write-offs can reduce your declared net income, making it harder to qualify for a higher mortgage with "A" lenders (major banks).

How Lenders Assess Self-Employed Income

Lenders generally look at a few different ways to assess your income:

1. Notices of Assessment (NOA) and T1 General:
   • Most "A" lenders (major banks) will require your last two years of T1 General tax returns and corresponding Notices of Assessment (NOAs) from the CRA.
   • They typically average your net income from these two years. They might use the lower amount if your most recent year's income is lower.
   • This is the most common method for traditional lenders.
2. Bank Statements (Stated Income Mortgages):
   • Some "B" lenders and private lenders offer "stated income" programs, in which they assess your income based on 6 to 12 months of business or personal bank statements.
   • This can be a good option if your declared income on your tax returns is significantly lower due to write-offs, as they may consider your gross income or cash flow.
   • These mortgages might come with higher interest rates and potentially higher down payment requirements (often 20% or more).

General Requirements for Self-Employed Mortgages

Regardless of the income verification method, you'll generally need:

• Stable Self-Employment History: Most lenders require you to have been self-employed for at least two to three years.
• Good Credit Score: A strong credit score (typically 680 or higher for "A" lenders, though some "B" lenders may accept lower, e.g., 550+) is crucial.
• Down Payment:
  • For insured mortgages (less than 20% down payment), the minimum is 5% for homes under $500,000 and 10% for the portion above $500,000 (up to 95% LTV for properties under $1,000,000).
  • If bank statements are used for income verification, a 20% or higher down payment is often required to avoid mortgage default insurance.
  • For properties $1.5 million and above, a 20% down payment is required regardless of employment type.
• Manageable Debt-to-Income Ratio: Lenders will look at your existing debt to ensure you can comfortably afford mortgage payments.
• Proof of Business Operation: This might include articles of incorporation, HST number, or a master business license.

Documents You'll Likely Need

• Government-Issued ID (photo ID, SIN number)
• Proof of Address (utility bills, etc.)
• Notices of Assessment (NOAs) and T1 General Tax Returns (for the last two years)
• Business Financial Statements (Profit & Loss, if incorporated)
• Bank Statements (personal and/or business, typically 6-12 months)
• Proof of Down Payment (bank statements, investment statements, gift letter if applicable)
• List of Assets and Investments
• Details of Current Debts (credit cards, loans, lines of credit)
• Property Details (MLS listing, signed Offer to Purchase, if you've found a property)

Finding a Mortgage in Peterborough for Self-Employed Individuals

Working with a mortgage broker is highly recommended for self-employed individuals in Peterborough. They have access to a broader range of lenders (including "A", "B", and private lenders) and can help you navigate the complexities of self-employed mortgage products. They understand which lenders are more flexible with different income verification methods.

Choosing The Right Mortgage Broker Makes All the Difference—Experience Matters!

With over 30 years of experience in finance, Mike Cara, your Ontario Trusted Top-Rated Mortgage Broker in Peterborough, specializes in helping clients that most other brokers cannot help.

• Mortgage Broker in Peterborough | Mike Cara
  • Address: 398 McDonnel St., Unit 4, Peterborough, Ontario, K9H 2X4
  • Phone: 705.772.7878
  • Website: https://www.mikecara.ca/index.php/mortgages-self-employed-peterborough-across-ontario