Self-employed mortgages can be difficult enough to obtain. But what are you supposed to do when you’re self-employed and need a construction loan to complete a new home that’s being built from the ground up? Truthfully, it’s no harder for self-employed individuals to get these types of loans than it is anyone else. What self-employed individuals need to remember is that they need to have verifiable income – something not all do.
Verifiable income is, as the name suggests, income that you can prove (or verify) that you made during the year. The best way to do this is with the Notice of Assessment from that year’s taxes, and to claim all that you actually made during the year. This is where many self-employed individuals get hung up when trying to obtain any kind of first or second mortgage, because they don’t always claim all of their income. Bank statements can also sometimes be used, but banks and major lenders are becoming extremely picky about who they give these kinds of loans to, and that bank statement may no longer be enough.
Another qualification that lenders will often require is that they require you to have been self-employed for at least two years before taking out a construction financing loan. This can be verified through past invoices, or past tax returns.
If you can’t verify your income, or how long you’ve been self-employed, your options will be limited but it doesn’t necessarily mean that you don’t have any other options. If you have equity, either through a large down payment on the home that’s about to be built, or through owning equity on another property, you still may be eligible for a private mortgage. Private mortgages are given out by private lenders, and while their requirements will still be strict (such as having at least a 35 per cent down payment at times) you may still find that they’re not as strict as the major lenders.
The most important thing to remember with a self-employed mortgage of any kind, whether it’s a standard mortgage or a construction loan, is that you must be able to verify your income – very, very few lenders today will give out loans if you are unable to do so. Always claim all of your income on your income tax returns, and that will be enough to verify it. Once that’s in place, all you have to do is get excited! You’re building a new home, and how awesome is that?!
