Fiona McLagan - Your Self Employed Mortgage Expert

As business people, we are always cognicent of the bottom line: the best investment properties, the lowest interest rate, lowest down payment, the lowest monthly payment and to pay the lowest income tax possible (Learn to make your mortgage tax deductible - Click here). If this describes your situation, you need to call us TODAY!

For mortgage lenders, self-employed individuals fall under a special category. Unlike salaried employees, the income for self-employed people fluctuate depending on the stability of their business. Secondly, self-employed individuals have the ability to write-off more expenses than salaried employees. These write-offs may not truly reflect their earning ability. Mortgage brokers in BC have a solution for you.

Recognizing the growing number of self-employed individuals in Canada, many institutions have designed programs to tap this market by offering what they call No Income Qualifier (NIQ) programs. These mortgages do not require verification of income. All the borrower needs to do is to provide a copy of their Notice of Assessment to prove that they do not owe the government back taxes.

In the past, most NIQ programs required a down payment of between 25% to 35%. It is now possible, with mortgage insurance from Genworth (formerly GE Mortgage), to borrow through mortgage brokers (BC) with a down payment as low as 5%. Genworth is looking for businesspeople who have good credit (minimum credit score of 680) and been in the business for at least 3 years.

If the borrower has less than perfect credit, there are specialty lenders that will consider self-employed individuals on a high-ratio basis. These mortgage are available only through mortgage brokers in BC.

Of course, if the businessperson can provide full documentation, he/she can qualify under traditional lending programs. These mortgages can be either conventional or high ratio. For a conventional mortgage (i.e., mortgages where the borrower has at least 25% down payment), the rules for qualification will vary from lender to lender. On high ratio mortgages, the lender will have to comply with the Canadian Mortgage and Housing Corporations (CMHC) or Genworth rules. Discuss your mortgage issues with your mortgage broker BC so that you know much you qualify for.

On these traditional programs, borrowers should be prepared to provide the complete T-1 General (3 years), full "Statement of Business Activities" (3 years), Notice of Assessment (3 years) and current year-to-date information. The lender, at their discretion, may allow add backs for depreciation, salary paid to owner/spouse, rent paid to owner (such as in a home office). Most lenders will be looking to establish the average income for the past 3 years in determining the amount the borrower is qualified to borrow. Your mortgage broker (BC) will be able to provide you with a complete requirements for a fully qualified mortgage.

No Income Qualification (NIQ) programs

Given the variety of programs available, it is best to consult with me as to which one is best for you.

Lender	Down Payment	Comments
Resmor/ Genworth	5% down for purchase (10% refi) (NEW)	700 credit score for 5% down; 40 yr amortization available; 2 yrs in business
Brigewater/AIG	5% down for purchase (10% refi) (NEW)	700 credit score for 5% down; 650-700 score at 10% down ; 40 yr amortization available; 2 yrs in businesss
Accredited Home Lenders	5% down for purchases and refi (10% for condos)	640 credit score required
Household Finance	10% down for purchase and refi (15% for condos)	600+ credit score; 50% TDS; 2 year term; no insurance fee
Maple Trust	10% for purchases	Good credit, Subject to payment shock; only available through mortgage brokers (BC)
BMO/ Bridgewater/ Resmor	10% for purchases and refi; Genworth insured	credit score of 680; 3 full years in business; GE Insured; 7.3% mortgage insurance fee to GE at 10% down; Resmor/Bridewater - only available through mortgage brokers (BC)
GE Money	10% down payment with 680 credit score (15% for condos)	12 months in business required
Scotia Bank (GE Insured)	15% for purchases, switch, refinance	At 15% DP, insured by GE Mortgage at 3.65% fee; no pre-approvals for 15% down payment & min. 3 years self-employed
FirstLine (Alt-A, Flex A program)	10-25% for purchases, equity take-out, refinance	Below 25% down payment require mortgage insurance; pre-approvals granted;only available through mortgage brokers (BC)
First National Excalibur	10% for purchase, refinance with good credit	No pre-approvals; only available through mortgage brokers (BC)
TD/HSBC/ING	35% down payment	Pre-approvals granted
FirstLine Access	25% down payment	Posted rates 1, 3 or 5 year rates; rentals allowed; weaker credit will be considered

Note: Lender policies change without notice.

Undocumented income

Wells Fargo has an "alternative documentation (Alt Doc)" program which allows individuals such as the self-employed or those with undocumented income (e.g., tips) to use that income to qualify for a mortgage. Up to 90% financing is available. The borrower's credit score cannot be lower than 600 to qualify.

Wells Fargo will attempt to verify your income in other ways. They may require your bank statements for the past 12 months. Or, if you earn tips, they will talk to your employer to verify reasonableness of your claimed income. Wells Fargo products available through mortgage brokers in BC.

Are you having cash flow problems? or, are you paying too much interest on your credit cards?

Why not consider refinancing your home? If you have a credit score of at least 630, Household Mortgage will provide a 2nd mortgage up to 90% of the value of your home. You don't even have to prove your income. Consolidating your debts could reduce your monthly payments and provide you with the needed cash for your operations.

Another option is an equity line of credit. There are lenders that will provide a line of credit up to 85% of the value of your home without income verification.

Do Peruse These Articles of Interest, Published Through Mortgage Intelligence:

No Income Qualification (NIQ) programs

Lender

Down Payment

Comments

Note: Lender policies change without notice.

Undocumented income

Are you having cash flow problems? or, are you paying too much interest on your credit cards?