26 Sep Program for the self-employed
Are you self-employed and planning to buy a property? Are you worried about the mortgage approval? Until recently, if you were self-employed you could definitely get a mortgage, but it was not an easy process due to the fact that income was variable and unpredictable. However, the Canadian Mortgage and Housing Corporation has announced changes aimed at giving lenders more guidance and flexibility when it comes to self-employed borrowers.
You may not know, but self-employed individuals make up about 15 percent of Canada’s population. In the changes to the self-employed program, CMHC has stated several factors that could be used to support a lender’s decision to give a mortgage to self-employed borrowers who have been operating their business for less than two years or have been in the same line of work for less than two years. According to CMHC, the factors could include things such as acquisition of an established business, sufficient cash reserves, predictable earnings and previous training and education.
Besides these factors, there is a broader range of documents that can be used to meet the income and employment requirements to help self-employed borrowers qualify for a loan. Some of the documents that may be used are a notice of assessment accompanied by a T1 General Tax form, a proof of income statement from the Canada Revenue Agency, and a form T2125, which is a statement of business or professional activities.
If you have less than 20 per cent of the value of the property to put as a down payment, you will need to get a mortgage insurance.
On the other hand, if you have been self-employed for less than two years, there are some good news for you as well. In this case, the changes will apply to the case of having a down payment of less than 20 percent and require a high-ratio default insurance, or having a down payment of more than 20 percent and are using a lender that insured all of your mortgages, or if you are switching to a lender that insured all of your mortgages.
Last, but definitely not least, mortgage default insurers, including Genworth Canada and Canada Guaranty, have programs for self-employed borrowers.
If you are interested in learning more about the self-employment program, please feel free to contact The Costa Group.