Stated Income Mortgages: Who Qualifies and How

Self-employed, a business owner, or have non-traditional income that's hard to document? Stated income mortgages offer a path to homeownership when traditional verification falls short, allowing you to qualify based on declared income rather than tax returns.

What Is a Stated Income Mortgage?

A stated income mortgage allows you to declare your income rather than prove it through traditional documents like T4s or tax returns.

Important clarification:
"Stated income" doesn't mean you make up numbers. You state what you earn, and lenders use alternative methods to verify it's reasonable.

Who Uses Stated Income Programs?

Self-employed individuals:
Business owners who minimize taxable income through deductions.

Commission-based workers:
Real estate agents, salespeople with variable income.

Recent self-employment:
Less than 2 years of tax returns available.

Cash-heavy businesses:
Industries where income is harder to document.

See our detailed self-employed mortgage guide for more options.

How Lenders Verify Stated Income

Lenders use alternative verification:

Business bank statements:
12-24 months of deposits showing revenue patterns.

Business financial statements:
Prepared by an accountant.

GST/HST returns:
Sales volume indicates business activity.

Contracts and invoices:
Proof of ongoing work.

Industry benchmarks:
Is your stated income reasonable for your profession?

Down Payment Requirements

Stated income mortgages require larger down payments:

• Minimum: 20% (uninsured mortgage)
• Typical: 25-35%
• Some lenders: 35%+ for higher risk files

Why? Larger equity reduces lender risk when income verification is limited.

Interest Rates

Expect rates 0.5% to 2.0% higher than conventional mortgages:

• A-lender stated income: +0.25% to 0.75%
• B-lender stated income: +0.75% to 1.5%
• Private stated income: +2.0% or more

The rate reflects the perceived higher risk.

Stated Income vs Traditional: Comparison

Common Stated Income Mistakes

Over-stating income:
Claiming income you can't reasonably demonstrate through bank deposits invites scrutiny.

Under-documenting:
Even stated income programs need supporting documents.

Ignoring alternatives:
Sometimes you can qualify with traditional programs using different documentation.

Not shopping around:
Lenders vary significantly in stated income programs.

Building Toward Traditional Qualification

Stated income should be a bridge, not a permanent solution:

Year 1: Use stated income program

Year 2-3: Build tax returns showing higher income

Renewal: Qualify for traditional mortgage with better rate

Alternative Options

Before going stated income, explore:

1. Non-QM programs:
Some lenders have specialized self-employed products.

2. Bank statement programs:
12-24 months of deposits, calculated differently.

3. Asset-based lending:
Qualify based on investments rather than income.

4. Add-back programs:
Lenders add back business deductions to taxable income.

What's Next

Stated income mortgages serve an important purpose but come at a cost. Work with a broker who understands alternative lender options to find the best solution for your situation.