Business for Self (BFS) Mortgage Programs Explained

Your business is profitable, your lifestyle is comfortable, and your bank account is healthy—but your tax return shows $40,000 in income after all your write-offs. When you apply for a mortgage based on that number, you can barely afford a condo. Sound familiar? Business for Self (BFS) programs recognize that entrepreneurs' real income often differs dramatically from their taxable income.

The Self-Employed Income Challenge

When you're self-employed, you legitimately minimize taxable income through:

• Business expense deductions
• Depreciation
• Home office claims
• Income splitting
• Corporate structures

The result: Your tax return shows income far below what you actually earn and can afford.

Traditional mortgage qualification uses Notice of Assessment income, creating a gap between your real income and "proven" income.

What Are BFS Programs?

Business for Self programs are specialized mortgage products designed for entrepreneurs, freelancers, and business owners who:

• Have been self-employed for 2+ years
• Can demonstrate business viability
• Have income that isn't fully captured on tax returns
• Need more flexible income verification

Types of BFS Programs

Traditional BFS (Full Documentation)

Uses your actual tax returns:

• 2 years of T1 Generals
• 2 years of Notice of Assessment
• Income averaged over 2 years
• Best rates available

Best for: Self-employed borrowers whose tax returns accurately reflect their income.

Stated Income BFS

Uses "reasonable income" for your profession:

• Declare income reasonable for your business type
• Lender verifies reasonableness
• Less documentation required
• Slightly higher rates

Best for: Business owners with legitimate income exceeding reported income.

Bank Statement Programs

Uses bank deposits to verify income:

• 12-24 months of business bank statements
• Income calculated from deposits
• No tax returns required
• Alternative lender rates

Best for: Newer businesses or those with complex tax situations.

Qualification Requirements

Standard Requirements

• Self-employed duration: Minimum 2 years (some lenders accept 1 year)
• Credit score: 600+ (higher scores = better rates)
• Down payment: Often 10%+ (some require 20%)
• Business verification: Business license, GST number, or CRA registration

Documentation Options

Full Documentation:

• 2 years T1 General tax returns
• 2 years Notice of Assessment
• Business financial statements
• Business license and registration

Stated Income:

• Business license and registration
• Proof of self-employment duration
• Reasonable income declaration
• Bank statements (some lenders)

Down Payment Requirements by Program

Higher down payments often unlock better rates and more options.

Interest Rates for Self-Employed

Expect some rate premium for BFS programs:

The premium reflects the lender's additional risk with non-traditional documentation.

Tips to Maximize Your Approval

Build Your Self-Employment History

• 2 years minimum is standard
• 3+ years opens more doors
• Same industry experience may count

Maintain Strong Business Finances

• Keep business and personal accounts separate
• Maintain healthy bank balances
• Document major contracts or clients

Optimize Your Credit

• Pay everything on time
• Keep credit utilization low
• Don't open new accounts before applying

Save for a Larger Down Payment

• 20% eliminates CMHC requirements
• More equity = more program options
• Demonstrates financial stability

Document Income Thoughtfully

• Consider tax implications of increasing reported income
• Balance mortgage qualification with tax efficiency
• Consult your accountant

Common BFS Mistakes to Avoid

Mistake 1: Not Declaring Enough Income

If your declared income is too low for your lifestyle, lenders question affordability.

Mistake 2: Inconsistent Documentation

Ensure bank statements, tax returns, and declared income tell a consistent story.

Mistake 3: Mixing Business and Personal

Commingled finances make verification difficult and raise red flags.

Mistake 4: Waiting Until the Last Minute

Self-employed applications take longer. Start 6+ months before you want to buy.

FAQ

Q: Can I qualify with only 1 year of self-employment?
A: Some lenders accept 1 year with prior industry experience or exceptionally strong applications.

Q: Do I need an accountant-prepared financial statement?
A: For higher loan amounts or stated income programs, often yes. Simple applications may not require it.

Q: What if I'm incorporated?
A: Corporate income is treated differently. You may need corporate financials plus personal returns.

Q: Can I use my spouse's employment income?
A: Yes. Combining self-employed income with spousal employment can simplify qualification.

Q: What if my business had a bad year?
A: Lenders look at averages and trends. One bad year with explanation may be acceptable.

Q: Are stated income programs still available?
A: Yes, but with more oversight than before. Income must be "reasonable" and verifiable.

What's Next

Self-employment shouldn't prevent homeownership. Connect with our BFS specialists to explore which programs fit your situation and how to present your income optimally.