How Much (Self Employed) Income Should You Report, Part II
I recently wrote about why, if you're self employed, you should not hesitate to claim all your legitimate expenses and not worry about reporting a higher net income for mortgage qualifying purposes. I'm pleased to say I had a lot of good feedback on the article. If you haven't read it, but would like to, click here to read the article now.
I decided to write about the documents that self employed applicants need to provide in order to qualify for a mortgage with our "alternative lenders" who specialize in mortgages for self employed borrowers.
1) Business bank statements -- this is most important. We usually need 12 months worth of bank statements, but sometimes 6 months is enough. Institutional lenders want to make sure there is a steady cash flow.
2) Articles of Incorporation - we need to see that you are the owner of the company whose bank statements we are looking at.
3) Tax Returns and T1 Generals. These are sometimes important, but not always. We can often add back certain expenses to increase the bottom line figure used in qualifying for the mortgage, but if you have been very aggressive in writing off legitimate expenses and you are reporting not much income, these documents may be less useful.
4) Mortgage/Credit application -- our lenders like to know the who they are lending money to, so this is an important step. We really do need to understand the whole story.
The above list isn't exhaustive, but it gives you an idea what institutional lenders are looking for. If you aren't reporting much net income AND you cannot show that you have a steady revenue stream on your bank statements, we might still be able to get you a mortgage based on your credit, or based on the equity you have in your property. Never avoid paying taxes, but do not hesitate to claim all legitimate business expenses!
For your next mortgage, call me today. I look forward to hearing from you!
Sincerely,
David Grossman MBA
Loan Central Canada/Real Mortgage Associates Lic # 10464
Tel. 416 876 2031