Five tips for getting a mortgage as a self-employed home buyer
Many Canadians find self-employment to be a fulfilling way to make a living, whether as a freelancer, gig worker or small business owner. In fact, October 2021 data from Statistics Canada showed that more than 13% of the country’s workers are self-employed.
However, there is a common misconception that getting approved for a mortgage as a self-employed home buyer is difficult to the point of being impossible.
The truth is that being self-employed doesn’t mean you won’t be approved for a mortgage. It just means that the application process and requirements may be different from someone with a traditional full-time job.
With this in mind, we look at some ways you can prepare to apply for a mortgage as a self-employed home buyer.
1. Keep complete records of all your income sources.
Having a stable source of income shows that you can make the required payments to service a mortgage, so make sure your income flow is well documented and can be easily verified by lenders.
Examples of documents that can help you prove you have a stable source of income include:
- Notices of Assessment
- Bank statements
- Financial statements
- Contracts and agreements
- Business or professional licenses
2. Maintain a good credit score.
A good credit score is an important part of a mortgage application that lenders use to evaluate your application. As such, it’s important to understand the components that make up a good score and take the necessary steps to maintain it.
Some effective ways that can help you maintain a good credit score include:
- Paying the full balance of your credit cards on time,
- Keeping the utilization of your credit limits to 30% or less, and
- Avoiding hard inquiries on your credit history.
3. Save for a larger down payment.
A larger down payment increases the value of your interest – or equity – on your home, which in turn widens the range of financing options you can potentially qualify for.
However, it’s important to note that saving for a larger down payment takes planning and dedication. In this blog, we outline some strategies that can help you get started.
4. Take steps to reduce your debt.
Paying off the balance of any existing loans you have will reduce the number of monthly payments you have to make. This will allow you to free up your cash flow and make it easier to service your mortgage.
5. Work with an experienced mortgage broker.
Mortgage brokers are licensed professionals who will listen to your entire financial story and work with you to find the best solution to meet your needs. An experienced mortgage broker will also be familiar with the ins and outs of the housing market and have close relationships with alternative lenders such as Home Trust to provide solutions around your financial circumstances.
With careful preparation and help from a skilled mortgage broker, entering the housing market as a self-employed home buyer does not have to be stressful. And when you’re ready to buy your home, Home Trust has a range of financing options available. Learn more by visiting hometrust.ca/mortgages.
The information, materials and opinions contained in this Blog are provided for our information only. This Blog does not constitute legal, financial or other professional advice and you should not rely on it as an alternative to specific advice based on your particular circumstance. This Blog contains links to third party websites. These links are provided for information and convenience; Home Trust does not endorse the content of any third party website, and it makes no representation or warranty as to the information on such third party sites. By clicking on any link to a third party site, you leave Home Trust’s website and do so at your own risk. Home Trust disclaims all liability for any damage or loss that results from your access to or reliance on information contained in this Blog or any third party site.