Business Owner/self employed Guide:

Are you a business owner or a self employed individual just like me? Then this guide is for you:

1. There are 3 different approaches for each type of business and income:

a). Unincorporated businesses like partnerships:

• A lot of unincorporated business owners like sole proprietors or partnerships  do not register their businesses and don’t have a dedicated business account for their business income and expenses too instead it is usually mix into their personal account making it hard to identify which transactions are personal and which are for their business.
• However, that is usually not a problem. As most lenders don’t need to see if you have registered your business(es) and have a business account. Instead, lenders or banks will use your 2 most recent years T1 General’s net business income for qualifying purpose and will need a minimum 2 years business history.
• Also if you don’t have 20% down payment for your mortgage, don’t worry about it as there are business for self ( BFS) programs for both insured ( less than 20% down payment) and conventional (more than 20%) mortgage deals.
• Example of unincorporated businesses include self employed driving instructors, realtors, construction workers and cooks.

b). Incorporated businesses like corporation:

• Incorporated businesses are actually corporations where the business owners will have something called the article or certificate of incorporation to proof the businesses have been registered and a dedicated business account to keep track of all business incomes and expenses and to separate personal and business transactions to make things easier to manage and organize.
• Just like unincorporated businesses, lenders will need minimum 2 years business history. But unlike our unincorporated businesses counterpart, we don’t use T1 Generals instead we are going to use financial statements prepared by an accountant for qualifying instead.
• There are BFS programs for borrowers that have and don’t have 20% down payments.
• Examples of incorporated businesses tends to include realtors, travel nurses and IT professionals like software developers

BOTH A AND B ARE FOR BORROWERS WHO DIDNT WRITE OFF TOO MUCH OF THEIR BUSINESS INCOME OR/AND  DRAW/WITHDRAWAL ENOUGH SALARY OR DIVIDEND OR BOTH INCOME TO BE ABLE TO QUALIFY THEIR MORTGAGE WITH A PRIME LENDER LIKE SCOTIABANK.

BUT WHAT HAPPEN IF YOU WRITE OFF TOO MUCH OF YOUR BUSINESS INCOME OR DIDNT TAKE OUT ENOUGH SALARY OR DIVIDEND INCOME TO BE ABLE TO QUALIFY FOR A MORTGAGE WITH A PRIME LENDER? WHAT OPTIONS DO YOU HAVE NOW?

YOU WILL NEED TO USE AN ALTERNATIVE ALSO CALLED B LENDERS OR EVEN PRIVATE MORTGAGES. SO WHAT DO B LENDERS USE TO QUALIFY FOR YOUR MORTGAGE?

C). B lender for both A and B businesses:

• alot of borrowers don’t like to use b lenders for their mortgages because b lenders charge a higher interest rate and need to pay both broker and lender fees.
• But they offer more flexibility and don’t need to look at your tax documents for qualifying purposes. Instead, b lenders tend to use your bank statements with supporting documents like invoices to determine your business income and expenses for qualifying your mortgage instead.
• You will need 20% down payment for b lenders.
• FUN FACTS more and more borrowers are turning to b lenders to qualify for their mortgages

I hope this guide has been helpful to you and if you have any questions feel free to contact me:

Frankie Ho

647-982-0130

frankie.ho@calibermortgage.ca