Living in
Calgary my day to day life I am
surrounded by the self-employed. As I grew
up I came to understand that working for my own dreams instead of making
someone else’s come true was at the very core of my being. I have come to believe that it is the best
way to flourish in life, and one of the reasons why I work as a mortgage broker. This is a reason to get up in the morning. A reason to smile, a reason to provide great
customer service as you are building it for yourself. Yes you get the benefits of making your own
hours, taking vacations whenever you want and not having to answer to a
boss. However the downfall of this is that you have the frustrations of
making your own hours, taking vacations and not having to answer to
yourself! Then there is the financing part of things, and what do you pay
yourself in this Alberta marketplace with the cost of living?
However
as a Calgary Mortgage broker I do see some business owners believe if their company
makes 12,000 a month that that is what kind of income they are making and the bank
should use this to qualify them. This is
not always the case, it’s a little more complicated that that if the company is
incorporated. No longer is it just about
finding you the best mortgage rates, rather its about proving you make enough
to qualify for the home mortgage.
Having
two years history of income goes a long way to pave the road with success. Lenders like to you at something for more than
6 months or 1 year and change. Then again
making 16,000 one year then showing 78,000 the next is going to be harder to
get your mortgage approved.
Calgary
and Canada wide, Banks and lenders realized that self-employed borrowers
provide a chance for success and stability. As a result there are
different programs that are available for self-employed borrowers. One
such program is the ability to gross up your income, another is to add back
certain expenses and the other is a stated income.
Here they
are explained.
Gross up your income (Line 150):
The
benefit to using this method is that there is no added Canada Guarantee/CMHC/Genworth
premiums.
Do this by
looking on your CRA Notice of Assessment for the most recent year the top line
is usually Line 150. This shows your gross taxable income for the
previous year. Gross up then average the
last two years on this to determine your income.
Add backs:
If the
gross up is not enough, then some lenders they will allow us to review your tax
returns along with the corresponding CRA Notice of Assessment. Business
use of a home, Motor Vehicle expenses, Capital Cost Account, and Depreciation
of Amortization expenses can be added
back to your Line 150. In many cases, using add-backs often give us a
higher income than just the grossing up line 150. The benefit to this
method is that the resulting income is usually higher than grossing up and
there are still no added CMHC/Genworth premiums.
Stated Income:
The last
method that is available is self-declaring your income. The purpose of
this program is to offer a method for people to use an income that wouldn't typically
be acceptable by a lender. There is a reasonability assessment for
the income being used. Which means if has to pass the sniff test for you
to get your home mortgage.
The
disadvantage is that unlike the other two options you will need 10% down for a down
payment. Also if the mortgage is high
ratio (above 75% of the house value or purchase price) then the Canada Guarantee/CMHC/Genworth
premiums are slightly higher.
Why should you use You-Mortgage and Mortgage
Architect for your next mortgage as a self-employed buyer?
Our goal
is to seek out the cheapest low rate mortgage, most inexpensive and effective way for you to get
approved for mortgage financing as a self employed borrower. Then we will
look at the different mortgage products that are being offered as each lender
is different, with changes that could cost you money if we don’t take your
goals into the equation. Just don’t play the waiting game with us and
drag your feet on the source documents and your tax documents it makes finding
the perfect home for you a little tougher.
Provide as much as you can. It’s
better to have too much than not enough and have me bugging you for more
information. Yes I will provide a tick
sheet should you have questions on getting your home mortgage with self
employed income.
Call or text us today so we can have a look. 403-807-8779
An Alberta Mortgage Broker is here to help you.
