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Stated Income Mortgages for the Self-Employed

Mortgages for the Self Employed

There are nearly 20% of income earners in Canada who are self-employed. With more Canadians becoming self-employed everyday lending institutions have developed a mortgage based on credit history and confirmation that you don’t have any outstanding taxes. With this new program Canada’s working population can now obtain financing up to 90% of the value of the property they are buying.


Who Qualifies?

Clients with good credit rating, have a minimum 10% down payment- 5% must be from the borrowers own savings. and have no outstanding personal taxes. They must prove they have been self-employed for a minimum of two years; such as, documentation such as a business credit report, business license, G.S.T. returns or articles of incorporation. 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.

Documentation Requirements:

Sole Proprietorship

A one-owner operation where the owner directs all the activities of the business, assumes all authorities and obligations, and is liable for its business debts. The sole proprietor income is reported to revenue Canada on the standard tax return (T1 General) together with Revenue Canada’s required statement of business or professional activities.
Documentation requirements – Any one of the following:

  • Business License
  • Business Credit Report
  • GST/HST Return Summary
  • T1 Generals with statement of business activities attached for a minimum 2 years
  • Audited Financial Statements for the last 2 years, prepared and signed by a CA
  • Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears
Partnerships:

Partnerships are businesses owned by two or more individuals who share the profits or losses of the business operation. The partnership income is reported to Revenue Canada on the standard tax report (T1 General) together with Revenue Canada’s required statement of business or professional activities, which reflects the percentage of the NET income or loss for each partner of the enterprise.
Documentation requirements – Any one of the following:

  • Business License
  • Business Credit Report
  • GST/HST Return Summary
  • T1 Generals with statement of business activities attached for a minimum 2 years
  • Audited Financial Statements for the last 2 years, prepared and signed by a CA
  • Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears
Corporations:

A limited company or corporation is a legal entity, separate from the persons (all shareholders) who own it. The business can own assets, enter into contracts and conduct business transactions in its own capacity. The company is called limited because the liability of the shareholders is limited to their investment. All provincial Corporations must obtain articles of incorporation from the province in which they are registered or may be federally incorporated. The applicant’s personal income will be reported by T4 from the corporation.
Documentation requirements – Any one of the following:

  • Articles of incorporation
  • Business Credit Report
  • Audited Financial Statements for the last 2 years, prepared and signed by a CA
  • Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears

Current guidelines for Genworth’s Business for Self program state the following:

  • 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)

 

   

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