Self-Employed Homebuyer Programs
There are more people working independently than ever before, and the numbers are rising. Some become entrepreneurs by choice, and some due to changes in today’s work environment. We have helped many people who fall in this category: consultants, artists, musicians, actors, restaurateurs, realtors, commissioned sales people, doctors, lawyers, accountants, freelance workers, builders, designers, home renovators, dancers, hairdressers, etc.
For the most part, income verification is the big problem here, and also the length of time in the business. We have mortgage products ranging from no income verification to low documentation, and we will recommend one that could meet your borrowing needs.
You can be self-employed, and if your reported income is sufficient to qualify under traditional approval guidelines, then you can purchase with as little as 5% down payment, and pay the regular insurance premiums as everyone else.
However, if your reported income isn’t enough to qualify you for the mortgage you are seeking, the insurers (CMHC, Genworth, Canada Guaranty) offer mortgage loan insurance options for self-employed borrowers to finance up to 90% of the purchase price (your down payment is 10% only). The insurance premiums are higher than the traditional programs (table follows).
|Applicable Premiums (Owner-Occupied properties)|
Loan to Value Ratio (LTV)*
Premium of Total Loan
Validation of Income
Validation of Income
|Up to and including 65%||0.60%||1.50%|
|Up to and including 75%||1.70%||2.60%|
|Up to and including 80%||2.40%||3.30%|
|Up to and including 85%||2.80%||3.75%|
|Up to and including 90%||3.10%||5.85%|
|Up to and including 95%|
• Traditional down payment
• Non-Traditional own payment
*for LTV ≤ 80%, a 0.20% surcharge will be applied for every 5 years of amortization beyond the traditional 25 year mortgage amortized period.
The above program also required a strong credit rating history, as well as specific documentation. If a borrower cannot meet the above criteria, there are Alternative Financing Options available, up to 90% of the purchase price or value of home (lesser of the two), at even more relaxed guidelines. There isn’t an insurer who will underwrite the risk and charge a premium as per above program – in these cases, the lenders generally underwrite the risk and charge a fee for this risk. Upon application, the mortgage professional at Homefund that is reviewing your application will advise which specific programs are available to you with full details of the mortgage.
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