Self Employed and Buying a Home

Many people may believe getting a mortgage while self-employed is difficult or even impossible. The truth is, it’s not! The mortgage approval process for a self-employed individual can be very easy.

If you are self-employed, do you:

• Have good credit?
• Have access to a down payment (10%)?
• Have difficulty proving your income using the traditional methods, or don’t declare enough income?

If you’re missing one of these three criteria, we recommend reading further or scheduling an appointment with Devin or Wes at Your Mortgage Link to talk about how we can work together to help you achieve home ownership.

There are many rumors circulating the wrong idea about self-employed programs being offered. Here are a few statements which lack information:

“You must be self-employed for a minimum of two years before being considered for a mortgage”

If you’ve been in the same line of work for more than 2 years, regardless of if you were self-employed in the past or not, you may qualify for a mortgage. For example, if you were working for Company “A” for 3 years as a salaried electrician and decide to become a self-employed electrician, you have 3 years experience in the field.

“You can’t get a mortgage if you declare very little income”

False, even though this statement seems to make sense. If you declare very little income or if you declare decent income but it’s insufficient to support your home’s financing, there is still hope.
The traditional way to qualify a self-employed individual is by using an average income from the last two years in business. As mortgage associates, we have access to a program called “Stated Income”.

This program allows mortgage associates to use a reasonable income to qualify a self-employed worker, even if this income is significantly higher than what you’ve declared last year.

For example: If you are a hair dresser and the average income for a local hair dresser in Saskatoon is $32,000 per year, your stated income can be $32,000 even if you’ve only declared $20,000 last year.

This program is subject to special guidelines:

1. The income presented must be reasonable compared to the industry. Using the example of the hair dresser above an income of $100,000 would be very unlikely and therefore, the application could be declined, or supporting documents would need to be presented.
2. You must provide proof that you don’t owe any income tax to the Canadian Revenue Agency. This can be done by providing your most recent NOA (Notice of Assessment) or a signed affidavit.

As Mortgage Associates, we deal with many different people in various financial situations. If you are a self-employed worker, there are options offered to obtain a mortgage. Just keep in mind that a great credit and access to a down payment are crucial for these programs to work.

Are you self-employed and looking to become a home owner? Schedule an appointment with us at Your Mortgage Link and we will be happy to answer any questions you may have.

Office: (306) 244-7755
Website: www.yourmortgagenow.ca
Email: devinandwes@yourmortgagenow.ca

Devin Cristo
Mortgage Associate
License# 315791
Cell: (306) 380-6049

Wes Will
Mortgage Associate
License# 315790
Cell: (306) 380-6039

Mortgage Payment Frequency Options

When it comes to deciding how often you’d like to make your regular mortgage payments, you can choose which mortgage payment frequency option will best benefit you. You have the option to synchronize your mortgage payments with your pay schedule. In Canada, you can choose from five different mortgage payment options: monthly, bi-weekly, accelerated bi-weekly, or accelerated weekly. Since most employees get paid bi-weekly, this schedule option is the most popular.

Some payment frequencies actually accelerate your mortgage repayment allowing you to reduce the total amount of interest you pay over the life of your mortgage. Choosing an accelerated payment also gets you out of mortgage debt years sooner.

What Are Your Options?

 

Monthly Mortgage Payment
A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month (i.e. on the 1st). With a monthly mortgage payment, you make 12 payments per year.

Bi-weekly Mortgage Payment
A bi-weekly mortgage payment is when your monthly mortgage payment is multiplied by 12 months and divided by the 26 pay periods in a year. With a bi-weekly mortgage payment, you make 26 payments per year.

Accelerated Bi-weekly Mortgage Payment
An accelerated bi-weekly mortgage payment is when your monthly mortgage payment is divided by two and the amount is withdrawn from your bank account every two weeks. With an accelerated bi-weekly mortgage payment, you still make 26 payments per year but the payment amount is slightly more than a regular bi-weekly mortgage payment.

Weekly Mortgage Payment
A weekly mortgage payment is when your monthly mortgage payment is multiplied by 12 months and divided by the 52 weeks in a year. With a weekly mortgage payment, you make 52 payments per year.

Accelerated Weekly Mortgage Payment
An accelerated weekly mortgage payment is when your monthly mortgage payment is divided by four and the amount is withdrawn from your bank account every week. With an accelerated weekly mortgage payment, you still make 52 payments per year but the payment amount is slightly more than a regular weekly mortgage payment.

The Benefit of Accelerated Payments

The one major difference between regular and accelerated payments is how the payment is calculated. With an accelerated payment option, you end up making roughly one extra payment a year. It’ll cost you a little more on a monthly basis, but will save you thousands in interest and help you pay off your mortgage even sooner.

If you have any questions regarding this topic, please give us a all today at (306) 244-7755 or email us at devinandwes@yourmortgagenow.ca.

Visit us online at www.yourmortgagenow.ca