When it comes to securing a mortgage as a self-employed individual or business owner in Canada, understanding the intricacies of income requirements and industry-specific guidelines is essential for a successful approval and closing process.
Unlike traditional employees with fixed incomes, self-employed individuals often experience income variability. However, this doesn’t disqualify them from purchasing their first home with less than a 20% down payment. In fact, Canadian citizens who are self-employed can acquire owner-occupied properties with as little as a 10% down payment, making homeownership more accessible. Additionally, as a first-time homebuyer, leveraging Registered Retirement Savings Plans (RRSPs) for down payments, with the ability to withdraw for first time home purchase, further facilitates entry into the housing market.

To mitigate risks associated with lower down payments, default mortgage insurance is available through institutions such as the Canada Mortgage and Housing Corporation (CMHC), Sagen Canada, or Canada Guaranty. However, securing approval for self-employed individuals entails additional considerations. Financial institutions and lenders may impose varying conditions, including the duration of business operations and the owner’s experience. While some lenders require a minimum of two years of active business history, others may evaluate cases with less tenure on a discretionary basis.

In addition to credit score and proof of down payment, providing comprehensive documentation is crucial. Personal income tax returns, purchase agreements, and evidence of financial growth are fundamental requirements. Moreover, presenting supporting documents substantiating business income and activities is imperative. These may include provincial and federal service tax returns, business licenses, and financial statements or reports certified by professional accountants. Demonstrating consistent financial health and viability strengthens the case for mortgage approval.
Navigating the mortgage approval process as a self-employed individual or business owner demands meticulous attention to detail and thorough documentation. By understanding the specific requirements and leveraging available resources, securing financing for homeownership becomes attainable, empowering individuals to realize their housing goals in Canada’s dynamic real estate landscape.