Self- employed and looking to buy a home? Qualifying rules have changed!
With more than 410,000 Albertans who are self- employed, times have changed when it comes to qualifying for a mortgage. With the B 20 Stress test in place having Albertans to qualifying at the Bank posted rate (currently 5.34%) many can qualify for less than they thought. With accountants doing their jobs to save business owners tax money, it doesn’t help them when it comes to qualifying for a mortgage. What you draw personally is currently what you get to use as your income to help buy that home. But we do have options:
Insured Stated Income Program: Insured Purchase with 10% down payment.
This program is designed for self-employed borrowers who are unable to provide traditional income verification but have a proven 2-year history of managing their credit and finances responsibly. Eligible borrowers typically own a small size business for a minimum of two years, which can be confirmed via a third-party arm’s length document. In addition, the borrower is required to declare their annual income and annual business revenue, which should be reasonable based on the industry, length of operation and type of business.
Stated Income with 20% down payment
This program is designed for self- employed borrowers who cannot prove traditional income. They can verify they own a business however may not be in business for the required 2 years. We look at a more common sense approach to this by acquiring 6 months bank statements to determine what income we can actually use. The interest rates generally float around normal conventional rates however do have a small lender fee involved.
The latest self- employed program released is for those who either recently purchased a business and do not have 2 years history or for those who may be in a trade with proven income and recently went self- employed. This is a fairly new program so we will expect a few hiccups as lenders and insurers truly understand what they can do with the insurer’s guidelines.
OSFI has said there is new rules coming down the pipe for self- employed borrowers which many mortgage approvals rely on the equity in the property, “OSFI will be taking steps to ensure this sort of equity lending ceases.”
Should you have any questions, please do not hesitate to reach out to your Top 3 Edmonton Mortgage Broker by calling (780) 244-0505 or email to email@example.com