Getting a Mortgage When You’re Self-Employed: The Complete Guide

Running your own business, freelancing, or earning commission-based income comes with unique mortgage challenges. Banks prefer predictable paychecks, but with the right preparation and documentation, homeownership is absolutely achievable for self-employed Canadians.

Why Lenders Are Cautious

Banks prefer predictable, verifiable income. With self-employed borrowers, they face:

• Income variability: Earnings fluctuate month to month
• Tax optimization: Business write-offs reduce reported income
• Documentation complexity: More paperwork to verify

The result? You need to work harder to prove your income—but it's worth it.

Types of Self-Employed Borrowers

Lenders categorize you differently based on your structure:

Sole Proprietors

• Simplest business structure
• Income reported on personal tax return (T1 General)
• Easier to document than corporations

Incorporated Businesses

• More complex income verification
• Corporate tax returns (T2) plus personal returns required
• Can show salary, dividends, or retained earnings

Commission-Based Professionals

• Real estate agents, insurance brokers, financial advisors
• Often treated as self-employed even with company affiliation
• Need to show consistent commission history

Documentation You'll Need

Be prepared to provide:

Don't Let Self-Employment Hold You Back

We specialize in self-employed mortgages and know exactly which lenders work best for your situation. Apply now to explore your options.

How Lenders Calculate Your Income

Traditional Calculation (A-Lenders)

• Average your net business income over 2 years
• Add back certain non-cash expenses (depreciation, home office)
• This becomes your "qualified" income

Stated Income Programs (B-Lenders)

• For businesses that write off heavily
• Based on reasonable income for your profession
• Higher rates but more flexible qualification

Bank Statement Programs

• Uses 12-24 months of deposits
• Calculates average monthly deposits
• Good for cash-heavy businesses

Learn about stated income mortgages for more details.

Strategies to Improve Your Approval Odds

1. Plan Ahead (2+ Years Before Buying)

Consider reducing business write-offs to increase reported income. Yes, you'll pay more taxes—but dramatically improve your borrowing power.

2. Separate Business and Personal Finances

Keep dedicated business bank accounts and meticulous records. Mixed finances raise red flags.

3. Build Strong Business Credit

Pay suppliers on time and maintain low business debt ratios.

4. Maximize Your Down Payment

Larger down payments reduce lender risk and may offset income verification concerns. Learn about acceptable down payment sources.

5. Work with a Mortgage Broker

We know which lenders are self-employed friendly and can match you with the right program.

Common Mistakes to Avoid

• Applying too soon: Build at least 2 years of self-employment history
• Over-optimizing taxes: Low reported income = low borrowing power
• Incomplete documentation: Missing documents delay approval
• Going directly to banks: Brokers access more flexible lenders

FAQ

Q: How long do I need to be self-employed?
A: Most lenders require 2 years of history. Some alternative lenders accept 1 year with strong documentation.

Q: Can I use business income if my corporation retains profits?
A: Yes, some lenders consider retained earnings. Documentation is key—work with a broker who understands corporate structures.

Q: What if my income varies significantly year to year?
A: Lenders typically average your income, but large drops in recent years are concerning. Be prepared to explain variances.

Q: Does my spouse's employment help?
A: Absolutely. A employed spouse with consistent income strengthens your application significantly.

What's Next

Self-employment doesn't mean you can't own a home—it just requires the right approach. Apply for a self-employed mortgage and let our specialists find the best solution for your unique situation.