Creative Financing for Self Employed
Buy a Home When You’re Self-Employed
You’d think having a successful self-employed business would make you an attractive prospect for a mortgage. Unfortunately, many lenders haven’t seen it that way and have required extra documentation and higher interest rates—if they approved you at all. Fortunately, your Mortgage Centre Specialist has access to easy, hassle-free mortgage financing for self-employed people at mainstream interest rates.
Can I Be Self Employed With Stated Income and Get a Mortgage?
Absolutely! Mortgage consultants at Home Mortgage Ontario take pride in helping those who are self-employed and thus must state their income. While being approved for a mortgage while being self-employed will require extra steps to confirm sufficient income for financing, we will make the process smooth and easy to ensure you receive the best mortgage product available in Windsor, London, Toronto, Ottawa, and all across Ontario.
What is Creative Financing?
Whether you are self-employed or have another non-traditional situation for your mortgage request, we work to find alternative financing methods and will be as creative as possible within mortgage guidelines to ensure that you receive the financing you need for your home purchase. Being creative means performing a full financial analysis and exploring alternative avenues to determine whether there is a way to get you approved for a mortgage.
Self-Employed CMHC Mortgage Insurance Product Features
- Available for purchase and refinance.
- Self-employed borrowers with documentation to support their income have access to all existing 1 – 4 unit CMHC Mortgage Loan Insurance products subject to the same product criteria and insurance premiums as salaried borrowers.
- Self-employed borrowers (with less than 3 years business operation) without traditional forms of income validation can access CMHC-insured financing for purchase transactions of up to 90% loan-to-value ratio (80% for refinance) for a 1 – 2 unit owner-occupied property.
- Flexible financing options – single advance, progress advances and extended amortization periods are available.
- CMHC offers mortgage loan insurance premium refunds for homeowners who purchase an energy-efficient home or make energy-saving renovations to an existing home. See CMHC Green Home for more information.
CMHC Self-Employed Property Mortgage Insurance Highlights
With Traditional Third Party Validation of Income
| Loan Purpose | Purchase, Refinance, Improvement (Single and Progress Advances) |
| Loan-to-Value (LTV) Ratio |
Purchase : up to 95% LTV (1-2 units) & up to 90% LTV (3-4 units) Refinance: up to 80% (1-4 units) |
| Down Payment | Traditional Sources* and Non-Traditional Sources** |
| Number of Units/Occupancy | 1 – 4 Units |
| Maximum Amortization |
LTV > 80%: 25 years LTV ≤ 80%: 40 years |
| Borrower Eligibility |
Permanent residents including newcomers to Canada. Non-permanent residents are limited to a 1 unit owner-occupied property and a maximum LTV of 90%. Income taxes must be paid and up to date. |
| Lender Requirements |
Borrower’s Notice of Assessment, audited financial statements or review engagement financial statements prepared by practising accountant. Income determined by averaging the income of the previous two year period or using most recent year if income has increased year over year for 4+ years. Confirmed NOA income can be grossed up 15%. |
| Employment Requirements | Minimum 2 years in same type of work, even if not in a self-employed capacity. |
| General Guideline for History of Managing Credit (Credit Score) |
LTV > 80%: Recommended minimum score of 600 LTV 60.01% – 80%: Minimum score of 580 LTV < 60%: No minimum score required Access your credit score and credit report from Equifax or Transunion. |
| Debt Service Guideline |
Credit score less than 680 must have a GDS of 35% and TDS of 42% Credit score of 680 or greater must have a TDS of 44% |
| Loan Security | First or Second Mortgage (Refinance) |
| Interest Rate Types | Fixed, capped and standard variable, and adjustable |
CMHC Self-Employed Property Mortgage Insurance Highlights
Without Traditional Third Party Validation of Income
| Loan Purpose | Purchase, Refinance, Improvement (Single and Progress Advances) |
| Loan-to-Value (LTV) Ratio |
Purchase : up to 90% LTV (1-2 units only) Refinance: up to 80% (1-2 units only) |
| Down Payment | Traditional Sources* (with the exception of gift down payments which are not permitted) |
| Number of Units/Occupancy | 1 – 2 Units |
| Maximum Amortization |
LTV > 80%: 25 years LTV ≤ 80%: 40 years |
| Borrower Eligibility |
Permanent residents with < 3 years business operation. Not available for borrowers without a Canadian credit history, commission-based borrowers and non-permanent residents. No assumption of CMHC-insured loans. Income taxes must be paid and up to date. |
| Lender Requirements | Copy of borrower’s business or GST licence or Article of Incorporation showing business licensed < 3 years. CMHC will use predictive models as an indicator of the reasonableness of the borrower’s stated income. |
| Employment Requirements | Minimum 2 years in same type of work, even if not in a self-employed capacity. |
| General Guideline for History of Managing Credit (Credit Score) |
Recommended minimum score: LTV 85.01% to 90% (purchase only): 650 LTV 80.01% to 85% (purchase only): 620 LTV 75.01% to 80%: 620 LTV up to 75%: 600 Access your credit score and credit report from Equifax or Transunion. |
| Debt Service Guideline |
Credit score less than 680 must have a GDS of 35% and TDS of 42% Credit score of 680 or greater must have a TDS of 44% |
| Loan Security | First or Second Mortgage (Refinance) |
| Interest Rate Types | Fixed, capped and standard variable, and adjustable |
* Traditional sources of down payment include: Applicant’s savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (< 50% of minimum required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency).
** Non-traditional sources of down payment include: Any source that is arm’s length to and not tied to the purchase or sale of the property such as borrowed funds, gifts, 100% sweat equity and lender cash back incentives.
CMHC Stated Income Premiums for Owner Occupied Properties
With Validation of Income
| Loan to Value (LTV) Ratio | Premium on Total Loan Amount | Premium on Increase to Loan Amount for Refinance |
| Up to and including 65% | 0.50% | 0.50% |
| Up to and including 75% | 0.65% | 2.25% |
| Up to and including 80% | 1.00% | 2.75% |
| Up to and including 85% | 1.75% | N/A |
| Up to and including 90% | 2.00% | N/A |
|
Up to and including 95% Traditional Down Payment |
2.75% | N/A |
|
Up to and including 95% Non-Traditional Down Payment |
2.90% | N/A |
CMHC Stated Income Premiums for Owner Occupied Properties
Without Validation of Income
| Loan to Value (LTV) Ratio | Premium on Total Loan Amount | Premium on Increase to Loan Amount for Refinance |
| Up to and including 65% | 0.80% | 1.50% |
| Up to and including 75% | 1.00% | 2.60% |
| Up to and including 80% | 1.64% | 3.85% |
| Up to and including 85% | 2.90% | N/A |
| Up to and including 90% | 4.75% | N/A |
Surcharges for Extended Amortization & Blended Amortization
Extended Amortization
Add 0.20% for every 5 years of amortization beyond the 25 year mortgage amortization period
Blended Amortization
For Refinance, add 0.50%
CMHC Are Mortgage Insurers – Not Lenders
It is important to keep in mind that the Canada Mortgage and Housing Commission (CMHC) offers government backed mortgage insurance. Although you may qualify under the CMHC guidelines, this does not guarantee that a lender will qualify you as each lender has their own guidelines for qualifying for any mortgage they offer.
If you’re self-employed and want to see what mortgage products are available to you, simply contact a consultant to discuss stated income mortgages.
Kyle Pearce
Home Mortgage Ontario Agent, M12000636
Phone 519-818-0078
Fax 519-966-6702
Email [email protected]
Office 2985 Dougall Avenue, Windsor, Ontario N9E 1S1
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Located in Windsor, Ontario, we specialize in home mortgages of all types in Essex County and across Ontario.
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The Mortgage Centre has decades of experience providing Canadians with mortgage financing through a team of nationwide independent Mortgage Centre offices. Because we’re local business professionals with roots in our communities, we are dedicated to helping our clients make well informed financing decisions.
