The problem
Over the past five years, there have been critical changes in the mortgage rules and regulations that have impacted self-employed people the most. The approval process has tightened up and lenders require a lot more backup documentation to support the level of income being submitted on the application. Lenders rely on what is called “stated income” or “low doc” rather than “verified income” for self-employed individuals. Normally, business owners often report relatively smaller incomes after all their income expenses (verified income), hence the reason we need to use the “stated income product,” which simply means the reasonable amount that a business owner in his/her industry can typically make.

What can we do about it?

There are three common traps that business owners
fall into:
1. Not recording enough income.
2. Not keeping accurate and verifiable records.
3. Not liquidating high debt and redundant assets.

To overcome these traps, I recommend the following tips:
1. Reconsider the level of income reported personally. Plan with your accountant or financial advisor the best possible means of achieving this with the lowest tax implications.
2. Maintain accurate and legal documentation in order to facilitate your mortgage broker’s application and support your stated income.
3. Consider paying down debt by liquidating redundant assets. This will better improve your debt service ratio and minimize your need for a co-signer.

Alternative lending
If these traditional means do not work, all is not lost. You may be eligible for alternative lending or private funding. Contact our office for more information.

Who to contact?
Cristina Piccirillo is a trusted mortgage broker with Dominion Lending Centres. With over 15 years of experience, she knows the changing market, has developed many established relationships with different lenders and has helped many self-employed professionals obtain financing.

www.cristinapiccirillo.ca
905-605-LEND (5363) / cpiccirillo@dominionlending.ca
281 Woodbridge Ave., Unit 28, Woodbridge, Ont.