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.
FAQ
Q: Is stated income mortgage the same as "liar loan"?
A: No. Pre-2008 "liar loans" had no verification. Modern stated income requires alternative documentation and reasonable income claims.
Q: Can I get stated income with less than 20% down?
A: Very rarely. Most require 20%+ because CMHC doesn't insure stated income mortgages.
Q: My accountant writes off everything—will that hurt me?
A: It can. The more you minimize taxable income, the more you may need stated income programs, which cost more.
Q: How long do I need to be self-employed?
A: Typically 2 years for best options. Newer self-employment may need private lenders.
Q: Can I refinance into a better rate later?
A: Absolutely. Once you have 2 years of strong tax returns, you can refinance to conventional rates.
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.
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