How to Get a Mortgage When You're Self-Employed

While more and more Canadians are turning to self-employment in an ever-changing economy, it can be intimidating to consider homeownership when you’re self-employed. The regulations are tighter for freelancers because income is less consistent and reliable than typical full-time employment, but that shouldn’t discourage you from pursuing homeownership.

Save for a larger than usual down payment. A 20 per cent down payment might be fine for someone applying for a mortgage with regular employment without having to purchase mortgage insurance. For freelancers, that number goes up to 35 per cent. On top of needing that large sum in the bank, you’ll also need to prove you earned it—that it wasn’t gifted to you by a generous family member or friend. You’ll need to show bank statements so they can verify it comes from your earnings.

Get your paperwork in order. You’ll need to have claimed self-employment for at least two tax years before a bank will be willing to consider you for a mortgage once you’re freelance. They’ll use this information to calculate your average income. Lenders will want to go through your taxes, accounts and bank statements in detail before they make any decision. An accountant can make sure you have everything you need.

Consider your taxes. While you’re probably claiming everything you can on your taxes to help come tax time, this can actually hurt you when it comes to purchasing a home because it makes it appear as though you have a smaller income. Lenders want to see a sizable income and not worry that you’re struggling, so it might be worth it to claim less expenses the year before you are looking to buy.

Have a three-year plan. All things considered, it’s no easy feat to get a mortgage when you are self-employed, but it’s entirely possible if you plan for it correctly. The main thing to keep in mind is that it is going to take time and money. It’s unlikely you can approach a lender today and be approved if you’re new to freelancing, but don’t let that discourage you. This year, focus on building strong credit, increasing your savings, getting your paperwork in order and increasing your income each month. Once you’ve checked all the boxes, there’s no reason you won’t be approved for a mortgage.