Since 2008, it’s been tougher and tougher to qualify for a mortgage in Canada. The amortization period now capped at 25 years and many first-time homebuyers are having to save more before they can get into the market and purchase a home.

Canadians are turning to self-employment as a way to boost a struggling job market, they also need to be able to prove how much they make.

Verifying your income

Self-employment can make proving your income that much more difficult.  Salaried employees applying for a mortgage can prove their income through T4 slips and a few recent paystubs. For the self-employed, it’s a bit more difficult.

Whether you’re a small or large business your lender must qualify you on the next best thing: your stated income. Stated income what you could reasonably earn in the industry you are in. The following documents may be required:

  • Your income tax returns and notices of assessment for the previous two years
  • Financial statements for your business
  • Proof that your HST and/or GST is paid in full

Can you afford it….

Your income is stated, the lender will qualify you for a mortgage based on two ratios.

#1 your Gross Debt Service (GDS) ratio

#2  your Total Debt Service (TDS) ratio

Your debt service ratios calculate how much you can afford.