For many people becoming their own boss by being self employed is a dream come true.
More and more Canadians are becoming self employed, in 2009 there were 2.7 million self-employed workers, which represents approximately 16% of the total workforce in Canada! Over the last decade the number of business-for-self workers increased by 11%.
Making the jump from an employee with a steady paycheque to being in business for yourself can be nerve wrecking. When you are in business for self there are many highs as well as bumps along the road.
Although self employed individuals can be very successful, they may find it more difficult to obtain mortgage financing. These individuals often do not fit the traditional mortgage lending criteria. This can become quite frustrating when it comes to arranging their mortgage.
Without consistent paycheques and a track record of earnings lenders can become concerned about lending for a mortgage. One benefit self employed people enjoy is the ability to write off business expenses against their income.
This minimizes their tax obligation but drives down the income they earn and claim for income tax purpose. This income is what the lender uses to qualify the borrower’s ability to repay or “service” the mortgage debt obligation.
Fortunately, some lenders are addressing the growing number of self employed people and the way they earn and report their income. It is worth noting that some lenders are more receptive to this line of business than others, despite the programs The Canada Housing and Mortgage Corporation (CMHC) have in place to protect the lenders.
The Canada Housing and Mortgage Corporation (CMHC) recognize the financing challenges of the self-employed and offer insurance products for borrowers either with or without traditional forms of income verification.
A self employed person can put 10% down for the purchase of their home and use a statement of income as long as their lending ratios, credit score and tax liabilities are in check.
So if you are considering stepping out into the world of self-employment you can be confident that you can obtain mortgage financing with today’s lending programs.