CMHC Makes it Easier for Self-Employed to Qualify for Mortgages

CMHC Makes it Easier for Self Employed to Qualify for Mortgages

Changes to guidelines for people who are self employed come in to effect on October 1st, 2018.  Self-Employed Canadians represent approximately 15% of the work force currently and that number is expected to grow.  If I were to venture a guess that number would be higher in Alberta.  These borrowers are key contributors and this move is to allow more self-employed to realize home ownership where they may not have been able to previously.  The focus of the changes is to give lenders more flexibility to help self-employed borrowers.

One of the biggest changes is the requirement to be operating your business for 24 months.  There are several factors that can be used to support a lenders decision to allow the use of income with someone operating a business for less than 24 months.

Here are some of the factors;
- Sufficient Cash Reserves
- Predictable earnings such as contracts
- Previous training
- Education
- Length of time in the industry

Another big change is the use of documentation to support and qualify a self-employed borrower’s income. One of the biggest factors impacting the income of somebody who is self-employed is all the write-offs they may have, which ultimately reduces their line 150 income.  Under the new guidelines lenders will now be looking at the Statement of Business or Professional Activities (T2125) to support “add back” for grossing up income for sole proprietorship and partnerships.  For example, supposing you are self employed and write off your cell phone bills as a business expense.  Under the new guidelines an underwriter looking at write-offs may choose to add back the cell phone bill expense as income as you are technically making the money anyway.  It would be up to the lender to decide

At the end of the day these changes have been implemented to make it easier for the self-employed borrowers to obtain CMHC mortgage loan insurance and to get competitive interest rates.  They are in my opinion open for interpretation by the lenders.  It will be up to the lenders and underwriters to determine exactly how they plan to interpret these changes. That said, if you are turned down by your bank or mortgage broker you may still have a chance of getting an approval.  You will need to find yourself an experienced mortgage broker who can sell your deal to a lender who is eager to make the deal work.

If you are self employed and have recently had trouble getting a mortgage, please contact me.  I would be happy to look and see if I can get it done for you.

Shawn Mooney | Bayfield Mortgage Professionals Ltd.
Broker of Record
Your Mortgage Broker for Life
Bus. # 403-945-8769 | Mobile # 403-828-1838
Email: mortgages@shawnmooney.com
Website: www.shawnmooney.com