In This Article What Counts as "Self-Employed" to a Lender How Lenders Calculate Your Income Path 1: Traditional (Line 150 averaging) Path 2: Stated income (BFS — Business For Self) Path 3: B-lender / alternative The 2-Year Rule (and the Exceptions) What You'll Actually Be Asked to Provide A Real Worked Example Down Payment Rules for Self-Employed Stress Test Still Applies What Actually Trips Self-Employed Files Up When to Use a Broker vs Your Bank FAQ Self-Employed and Tired of Hearing "No"? Table of Contents You've been running your own business for years. The income is real, the deposits hit your account every month, and your CPA does a great job keeping your taxable income low. Then you walk into a bank to get a mortgage and the conversation falls apart. That's the self-employed paradox in Canada. The same tax planning that saves you money in April makes you look broke to a lender in October. The good news: there are lenders who get it. Monolines, credit unions, and a handful of B-lenders have programs built specifically for business owners, sole proprietors, and incorporated professionals. You just have to know where to look — and your bank branch isn't the place. What Counts as "Self-Employed" to a Lender If your income shows up on anything other than a T4 from an unrelated employer, most lenders treat you as self-employed: Sole proprietor reporting on a T2125 Incorporated business owner paying yourself by T4 dividends, or a mix Commissioned salesperson with a T4 that has commission income Independent contractor paid via T4A Partnership income on a T5013 Anyone with more than 25% ownership in the company that employs them That last one trips up a lot of incorporated professionals — doctors, dentists, consultants — who think their T4 makes them an employee. It doesn't, if you own the company. How Lenders Calculate Your Income There are three real paths, and your file fits one of them. Path 1: Traditional (Line 150 averaging) The lender takes your last 2 years of Notice of Assessment (NOA) line 150 income, averages it, and qualifies you at that number. This is what every A-lender starts with. Example. Your T1s show $72,000 in 2024 and $84,000 in 2025. The lender qualifies you at $78,000 — even if your real cash flow is closer to $160,000. This is fine if your declared income is high. It's painful if your CPA writes off everything. Path 2: Stated income (BFS — Business For Self) A handful of A-lenders and most monolines offer "stated income" or "BFS" programs. You declare a reasonable income for your industry, supported by bank statements, contracts, GST/HST returns, and a clean credit file. Premiums apply if your loan is insured (Sagen and Canada Guaranty both run BFS programs). Uninsured stated income sits at A-lender rates with most lenders, often with a 10–15 bps premium. You generally need: Minimum 2 years self-employed in the same industry 10% down minimum for insured BFS (up to $1M), 20%+ for uninsured Credit score 680+ (most lenders want 700+) Clean business bank statements for 6–12 months Path 3: B-lender / alternative If your declared income is low, your business is under 2 years old, or your credit has bruises, a B-lender is the realistic option. They look at gross deposits, contracts, and the property itself. Rates run roughly 1.0–2.5% above A-lender rates, with a 1% lender fee on most files. This isn't a forever solution. It's a 1–2 year stop while you build the file you need to refinance back to an A-lender. See today's rates for self-employed mortgages The 2-Year Rule (and the Exceptions) Almost every lender wants 2 years self-employed in the same line of work. The reasoning is simple: one good year could be luck, two suggests you actually have a business. The exceptions that work in practice: You incorporated a business you used to run as a sole proprietor. Lenders will count the prior self-employed history. You bought an existing business with verifiable historical revenue. You're a licensed professional (doctor, lawyer, accountant) — some lenders will lend in year 1 with a professional designation. You went from T4 employee to contractor in the same field. Some monolines will count the T4 years for industry experience. If you don't fit any of those, you're usually looking at a B-lender for year one and an A-lender refinance in year two. What You'll Actually Be Asked to Provide Self-employed files are document-heavy. Get this together before you apply and the process drops from "painful" to "annoying": Last 2 years T1 General + every page of the NOA Last 2 years T2 corporate returns (if incorporated) Year-to-date business financials Last 6 months of business + personal bank statements Articles of incorporation / business license Confirmation you're in good standing with CRA (no tax arrears, GST/HST current) Two pieces of ID 90-day down payment history (where the funds came from) CRA arrears are the #1 file killer. If you owe HST or income tax, fix it before you apply — not after the lender finds it. Run your numbers with the affordability calculator A Real Worked Example Sarah owns an incorporated marketing agency in Mississauga. Her corporation grosses $480,000 and nets $180,000 after expenses. She pays herself a $65,000 salary and takes the rest as retained earnings. At a bank branch: They look at her personal T1, see $65,000 income, and qualify her for roughly $310,000 of mortgage. She wanted $700,000. Through a broker, stated income at a monoline: Income stated at $140,000 (well within what her industry supports and what her bank statements back up). Qualifying mortgage: ~$680,000. Rate: 0.10% above the best A-lender 5-year fixed. Same person. Same business. $370,000 difference in approval. That's what the right lender does for a self-employed file. Down Payment Rules for Self-Employed The down payment rules are the same as any other buyer in 2026: 5% down on the first $500,000 of purchase price 10% down on the portion from $500,000 to $1,500,000 20% down on anything over $1,500,000 (CMHC insurance not available) What changes for self-employed: Some stated income programs cap loan-to-value at 90% (10% down minimum) Insurer premiums add 0.10–0.20% on top of standard CMHC pricing for BFS Down payment funds must be traceable for 90 days — a sudden $80,000 deposit from your corporation will need a paper trail Down payment + 2-year rule in detail Stress Test Still Applies You qualify at the greater of contract rate + 2% or the 5.25% benchmark — same as everyone else. There's no self-employed exemption. What this means in practice: a self-employed borrower at $140,000 stated income with no other debts qualifies for roughly $640,000–$680,000 at today's rates. Add a car loan and that drops by $40,000–$60,000. What Actually Trips Self-Employed Files Up After years of running these files, the same five things kill more deals than anything else: CRA arrears. Even $2,000 outstanding will pause your file. Pay it, get the receipt, then apply. GST/HST not filed. Lenders pull this. If you're behind, file before you apply. Declining income year over year. $90K then $60K reads as a failing business. Either wait for a recovery year or use add-backs to explain it. Co-mingled bank accounts. Personal and business in one chequing account makes underwriting a nightmare. Separate them. Cash deposits. Anything you can't source on paper doesn't count toward your down payment. When to Use a Broker vs Your Bank Your bank can only sell you their own product. If their self-employed program doesn't fit your file, you're done. A broker has access to the monoline stated income programs (MCAP, First National, Strive, CMLS), the credit unions (Meridian, Alterna, DUCA), the insurers (Sagen, Canada Guaranty), and the B-lenders (Home Trust, Equitable, CMLS Aventure). Different files go to different places. That's the whole point. Stated income programs explained in detail Ready to Get Started? Contact us today for personalized mortgage advice and competitive rates. Get Pre-Approved Call (416) 822-7357 Frequently Asked Questions Self-Employed and Tired of Hearing "No"? Send us your last 2 NOAs and we'll tell you exactly which lender program fits your file — no credit pull required for the first conversation. Get Your Free Assessment → Can I get a mortgage in my first year of self-employment? Usually not at an A-lender. Some monolines will look at year 1 if you came from the same industry as a T4 employee. Otherwise it's a B-lender for year one and a refinance in year two. Do dividends count as income? Yes, if they're documented on your T5 and consistent year over year. Most lenders will average 2 years. Will my CPA need to write a letter? Almost always. Lenders want a CPA letter confirming you're self-employed, what you do, and how long you've been in business. Some files also need add-back letters explaining one-time expenses. Can I use retained earnings in my corporation as income? Some lenders, yes. They'll look at the corporate T2 net income and average 2 years. This is huge for incorporated professionals who keep money in the company. What if my last year was a bad year? Use a 2-year average and explain the dip in a cover letter. If the dip was COVID, a one-time client loss, or a deliberate investment year, lenders will often back it out. Do I need 20% down as self-employed? No. Insured self-employed mortgages exist down to 10% with stated income, 5% with traditional Line 150 income (same as T4 employees).
