ALBERTA HOME LENDING

Mortgages | Home Equity Loans | Alternative Financing
  • Email
  • Facebook
  • Linkedin
  • Twitter
587 848 8338
  • Home
    • About Us
    • Blog
  • Mortgage Rates
  • Alternative Mortgage Lending
    • Foreclosure Relief – Anywhere in Alberta & Manitoba
    • Commercial Mortgage Financing
    • Equipment Leasing
  • Online Mortgage Application
  • Investors
    • Mortgages for Sale
  • Contact us!
    • Glossary
Search the site...
Home» Alberta Lending » Mortgages for Self-Employed

Mortgages for Self-Employed

Posted by Dave Fitzpatrick - March 25, 2019 - Alberta Lending

Over the past couple of years, it has become increasingly difficult to get a mortgage for self-employed clients, and the move by the CMHC to limit its insurance coverage to those without income validation will only make things harder.

Self-employed borrowers still have access to mortgages with down payments below 20%; they just have to prove two years of income to secure the loan. This is reasonable in theory, but self-employed people have a misaligned incentive to minimize income for tax purposes.

Requirements like these have been a boon to lenders who charge a bit more on mortgages for self-employed clients. Known as “Alt-A`s“, they fall somewhere between the prime and sub-prime market in terms of the amount of risk they are willing to accept. They are lending to more and more people who only a couple of years ago would have been welcomed by the banks.

So how much more can alternative borrowers expect to pay? There is a misconception that the rates are double than that of the banks. A rule of thumb is a few percentage points higher than the banks. But some pay less and some pay more, depending on the perceived risk. People who do not qualify for a mortgage in the Alt-A market can are often referred to the Private market, where money is lent by individual investors. As unregulated lenders, they have the most flexibility to offer non-traditional financing.

Right now, there are two ways self-employed borrowers can get an insured mortgage: 1) with income validation and 2) without income validation. What is income validation? According to the CMHC, “copies of [a borrower’s] Notice of Assessment, audited financial statements or unaudited financial statements prepared by an independent third party, for the previous two year period”. In the second case, self-employed borrowers can bypass income validation with a 10% down payment and a good credit score – within reason. Anyone stating income over $100K faces increased scrutiny.

APPLY ONLINE

Genworth and Canada Guaranty have similar mortgage for self-employed programs. Their programs are designed for borrowers who are unable to provide traditional income verification but have a proven 2-year history of managing their credit and finances responsibly. Eligible borrowers typically own a small size business for a minimum of two years, which can be confirmed via a third-party arms-length document. In addition, the borrower is required to declare their annual income, which should be reasonable based on the industry, length of operation and type of business.

  • Purchase transactions: 90% LTV
  • Refinance transactions: 80% LTV
  • The income reported by the borrower must be reasonable based on the industry, length of operation and type of business
  • Strong credit profile with minimum 2 trade lines with at least two (2) years history
  • No mortgage, installment or revolving credit delinquencies appearing on the credit bureau in the past 12 months
  • No reported defaults on residential mortgages for the past 7 years
  • No previous bankruptcy
  • Minimum 5% down payment from the borrowers own savings. The remainder may be gifted from an immediate family member. Borrowed down payments are not permitted.
  • Borrowers with commission income are ineligible
  • Lender to ensure borrower(s) have no tax arrears
  • All applicants used to qualify must occupy the property (If two unit property, one unit must be owner occupied)
  • Spousal guarantors acceptable
  • Borrowers are permitted one insured mortgage Consultation-Attorney

Eligible Products:

  • Home Purchase & Refinance Program
  • Progress Advance Program
  • Purchase Plus Improvement Program
  • Second Mortgage Program

Ineligible Products:

  • Cashback Equity Program
  • Family Plan Program
  • New to Canada Program
  • Investment Property Program
  • Vacation/Secondary Homes Program

 

Contact me today to see what you qualify for or if you have further questions!

Comments are closed.

Recent Posts

  • Alberta & BC Home Equity loans

    August 28, 2019
  • What is a Second Mortgage?

    August 26, 2019
  • Mortgage Refinancing – Apply Now!

    August 24, 2019
  • Dealing with Tax Arrears & Revenue Canada Debt

    August 23, 2019

    Contact Dave

    • 587-848-8338
    • dave@belmormortgage.com
      • Linkedin
      • Facebook
    Serving BC & Alberta - Calgary, Edmonton, Red Deer, Lethbridge, Grand Prairie, Leduc, Olds, Medicine Hat and surrounding areas.

    (c) 2018 Dave Fitzpatrick - Web Design by Pop Digital Google+