Are You Self Employed? Consider these Tips to Manage your Mortgage!
Being self employed definitely has its perks. You can manage your time and productivity at your own pace and you are spared from the conventional grind that most employees face at traditional work places. However, one of the main disadvantages of the absence of a common 9-5 job is the difficulty in getting qualified for a Canada mortgage.
Most lenders do not find the prospect of self employment as trustworthy, as there is no definite fixed amount that a person earns every month. The chances of missing payments and defaulting are higher in this case; thus, a lot of lenders refrain from allotting a Canada mortgage loan to self employed individuals.
However, there are various Canada mortgage options available for self employed individuals as well! Go through the following tips and guidelines to get a viable Canada mortgage loan for yourself even when you are self employed.
- Having a good credit score will work wonders for you and help you get your hands on an attractive mortgage rate. A decent credit history will be a form of assurance for your lender, and the bank or lender may give it a preference over your financial standing and business history.
- Those who are self employed must have at least two to three years of working experience before they can embark upon a mortgage loan.
- A document including proof of the ‘stated’ income should be submitted with the Canada mortgage application. This stated income refers to what you earn through your business and depends upon the size and type of your venture. However, the main thing is that you should be able to afford your monthly mortgage payments with that income.
- Down payment is an important part of the whole procedure, and is particularly an important consideration for self employed individuals. Typically a 35% down payment is considered to be viable for self employed people. However, you can always go for a CMHC insured mortgage to bring down that amount to as low as 5%
- There are special mortgage products available that are particularly favorable for self employed individuals. Some of these include the Low Documentation Mortgage and the No Income Mortgage. Specifically targeted for the self employed, these mortgages take into account your credit score and not your income, and thus qualification for the mortgage is easier and more feasible.
Today, there is at least one person in every five Canadians who is self employed. Though finding a good mortgage product may be difficult for all those self earners out there, it is not entirely impossible. In a nut shell, it is indeed possible to qualify for a Canada mortgage loan even if you are self employed. However, you should plan and work on your savings proactively so that you can cater to your monthly installments without any additional hassle or problems and reduce the risks of losing your home even if you face any financial difficulties in the future.
At the end of the day, whether you are employed by an organization or working independently, the way you manage your budget and finances makes the key difference for your Canada mortgage! Best of luck!