Why do financial institutions make it so difficult for ‘non-traditional self employed’ borrower? It is amazing how large a category it really is, almost 16% of Canadians are Entrepreneurs or work for themselves ins some manner. And more importantly Statistics Canada data suggests that self-employed workers have a higher median net worth than salaried workers. So why do we get treated so harshly when looking for financing?
Timing Was Everything.
Before the financial crisis of 2008, a self-employed person with a credit score of 680 could count on getting a mortgage. Newer financial regulations forced federally regulated institutions (banks) to tighten their lending criteria. Overnight, mortgage requirements became more rigorous.
The big change? Stated income is gone: income verification is now the rule. Many if not all entrepreneurs take lower salaries to avoid paying tax and why wouldn’t you to avoid taxes. That is the system.
The Difference Between financing and not.
There are a number of alternate lenders that have responded to this market. Some let borrowers add deductions back into earnings. Others judge your income based on a reasonable amount for your business sector. Or allow you to get a mortgage of up to 80% of the value without the need for default insurance.
What You Have to Provide.
Most lenders ask for the following:
- Two years of financial statements
- Two Years Notice of Assessment from Revenue Canada
- Two Years T1 Generals
- Your credit score
- Proof that you are the owner of the business
Let’s Make Your Entrepreneurship Pay Off.
Call 705 606 1270 I have numerous mortgage and bank advisors to support