Think you’re out of options? If You’re Self Employed, a Mortgage is Still Possible

Think you’re out of options

Can I Get a Mortgage?

Self employed mortgage? You’re thinking there’s no way.

You’re thinking, with your credit rating, nobody’s going to approve you for a mortgage. Or you’re self-employed and don’t know where to start when trying to prove your income. If the bank you’ve been a client with for years won’t approve you, then who will?

Story after story tells us that the self employed mortgage is becoming more and more difficult.

The Self Employed Mortgage is More Than Possible

Well, there are more choices than you might think. In Canada, we have what are referred to as lending “tiers.” Most mortgages qualify with the A type lenders, through income and credit history. To qualify for an A lender mortgage, you need to have the following:

  1. Suitable employment or proof of income
  2. The required down payment or equity
  3. An acceptable credit rating

But what if you have two out of three? You have a good job and enough for a down payment, but a poor credit history? Then you may qualify for a B tier mortgage. Many A lenders offer B tier mortgages, which usually require a higher minimum down payment and will have a slightly higher interest rate. There’s also the private lending option. Private lenders are usually wealthy individuals who’ve set up their own company to lend money to consumers, but usually offer loans of shorter duration with higher interest rates. As with any mortgage, there are terms and conditions with B tier mortgages. It comes down to what you’re willing to accept to stop paying a landlord and move into your own home. Remember, you aren’t restricted to a B mortgage forever. Many homebuyers use B tier and private lenders in the short term until they can qualify for an A lender mortgage.

Self-Employed Have Special Challenges

So what do you do if you’re self-employed, you have good credit and enough saved for a down payment, but have trouble showing your income? Well, there are alternative, or non-conforming lenders. When we talk about A lenders, most of us typically think of the big six banks (TDCT, BMO, RBC, HSBC, CIBC, BNS).  But there are also Monoline lenders, who do A tier business but will also do mortgages that are not so straight forward – mortgages that make sense even when there’s difficulty showing income. The advantage of Monoline lenders is they are truly client driven; all they do is mortgages. They typically have better rates, terms and penalties, and won’t be soliciting you to open accounts and buy other products!

Broker or Banker?

BUT, if you deal exclusively with your bank, you’re not going to get the advice, or the access, to alternative lenders that you can with a Mortgage Broker. Only brokers can offer Monoline lender mortgages, so you’re not going to hear about them from your bank! A good broker will come up with a strategic plan, based on your needs and goals, before presenting you with options. Your broker should also have a complete understanding of the terms, conditions, and penalties contained in the fine print, and how they’ll affect your long-term financial goals. So, think you’re out of options? You’re not the first. You won’t be the last. I specialize in mortgages for first time homebuyers and the self-employed. Give me a call and let’s figure this out together!

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