Self-Employed Mortgage Option #1: The Stated Income Mortgage

On Friday we looked at a few reasons why it can be so difficult for the self-employed to obtain a mortgage. And if you’re self-employed and have already tried to obtain a mortgage, you already know many of those obstacles. One of the main ones being that often, the self-employed don’t have an actual income to prove and verify. While you may have tax documents, you still don’t have the security of that paycheque every two weeks, and lenders can often look unkindly on that. But, find the right lender with the right kind of mortgage, and you might just be their perfect applicant.
The way that self-employed individuals can get around verifying their income is with a stated income mortgage, rather than a verified income mortgage – which is the route traditional mortgages tend to take. A stated income mortgage is just that – a mortgage where an applicant (you) states their income and are taken at their word. The mortgage process then moves along as it conventionally would, using your stated income as a basis. Stated income mortgages were specifically created for those who are self-employed and don’t have a lot of documentation backing up their income, as well as those who rely heavily on things like gratuities for much of their income – money that is never documented.
Early in 2010, when the Canada Housing and Mortgage Corporation was trying to eliminate incentives for people to borrow who couldn’t necessarily afford it, they also changed regulations to their stated income mortgage program. These changes included things such as requiring borrowers to make a 10% down payment rather than one at 5% among other things. While this caused some confusion, it’s important to understand that those requirements only apply to insured mortgages and if you don’t need mortgage insurance, these regulations won’t apply to you.
While stated income mortgages can be a lifesaver for those that are self-employed and don’t have a lot of verification for their income, they can also be complicated home loans. To find out if it’s an option that’s right for you, contact an Ottawa mortgage broker first. They’ll not only guide you through the entire process of obtaining a stated income mortgage, but they’ll also help you find a lender that provides them!