Self-Employed Mortgages – Secure the Right Mortgage

Helping Self-Employed Canadians Achieve Homeownership

Being self-employed comes with many advantages—flexibility, independence, and the ability to control your income. However, when it comes to securing a mortgage, self-employed individuals in Canada often face more challenges than salaried employees. Lenders typically rely on standard income verification methods, such as pay stubs and T4 slips, which do not always apply to those who own a business, work as freelancers, or operate as independent contractors.

At Invis, we specialize in helping self-employed borrowers navigate the mortgage process. Whether you are purchasing your first home, refinancing, or looking to invest in a property, we provide tailored mortgage solutions designed to fit the unique financial situation of self-employed professionals.

This guide will explain how self-employed individuals qualify for a mortgage, what self-employed mortgage qualification in Canada requires, and how working with a mortgage broker can increase your chances of securing the right loan.

Can Self-Employed Individuals Qualify for a Mortgage?

Yes, self-employed Canadians can qualify for a mortgage, but the process differs from that of traditional borrowers. Since lenders prioritize stable income, they may require additional documentation to verify financial stability before approving a self-employed mortgage loan.

Here are some of the key factors lenders consider when assessing self-employed mortgage qualification in Canada:

• Business history – Lenders typically prefer self-employed applicants who have been in business for at least two years.
• Income stability – Consistent earnings over the past two years are essential for mortgage approval.
• Debt-to-income ratio – Keeping debts low in relation to income improves approval chances.
• Credit history – A strong credit score demonstrates financial responsibility and lowers the lender’s risk.
• Down payment size – While the minimum down payment in Canada is 5%, self-employed borrowers may need to provide a higher amount, especially if income verification is challenging.

Although self-employed applicants may face additional hurdles, mortgage brokers at Invis specialize in working with lenders who understand the unique income structures of business owners, freelancers, and independent contractors.

What Is a Self-Employed Mortgage?

A self-employed mortgage is a home loan designed for borrowers who do not earn a traditional salary but instead generate income from a business, freelance work, or contract-based employment. Unlike standard mortgages that rely on pay stubs and employer verification, self-employed mortgage loans use alternative income verification methods.

Self-employed mortgages allow borrowers to:

• Use business revenue as proof of income.
• Provide bank statements instead of pay stubs.
• Work with lenders who assess affordability differently than traditional banks.

While a self-employed mortgage loan operates similarly to a traditional mortgage, lenders require a more comprehensive financial review to confirm income reliability.

Self-Employed Mortgage Qualification in Canada

Qualifying for a mortgage while self-employed requires thorough financial documentation and preparation. Here are the main criteria lenders assess:

1. Income Verification for Self-Employed Borrowers

Unlike salaried employees, self-employed individuals do not receive regular paychecks. Lenders will require documentation such as:

• Personal income tax returns (T1 Generals) for the past two years.
• Notice of Assessments (NOAs) from the Canada Revenue Agency (CRA).
• Business financial statements, if applicable.
• Bank statements (typically six to twelve months) showing consistent deposits.

Some lenders offer stated-income mortgage programs, which allow self-employed borrowers to declare their income if they have difficulty meeting traditional verification requirements. These programs often require a higher down payment and strong credit history.

2. Credit Score Requirements

Your credit score plays a crucial role in determining your mortgage eligibility. Lenders generally prefer a credit score of 680 or higher, but alternative lenders may approve applicants with lower scores. Improving your credit score before applying can increase your chances of securing better mortgage rates.

3. Debt-to-Income Ratio (TDS and GDS Limits)

Lenders assess two key affordability ratios:

• Gross Debt Service (GDS) Ratio – Measures housing costs (mortgage payments, property taxes, utilities) against income. The limit is generally 39%.
• Total Debt Service (TDS) Ratio – Includes all monthly debt obligations (credit cards, car loans, student loans). The limit is usually 44%.

Keeping these ratios low strengthens your mortgage application.

4. Down Payment Requirements

The minimum down payment for a self-employed mortgage is 5% for homes up to $500,000, but some lenders may require 10% or more for borrowers with fluctuating income. If your down payment is less than 20%, you will need mortgage default insurance through CMHC, Canada Guaranty, or Sagen.

For borrowers with difficulty verifying income, private lenders may require a higher down payment (20-35%).

Documents Needed for a Self-Employed Mortgage

To prepare for a self-employed mortgage application, gather the following:

• Personal and business tax returns (T1 Generals and NOAs) from the past two years.
• Financial statements for incorporated businesses.
• Bank statements showing income consistency.
• Proof of business registration or incorporation documents.
• List of assets and liabilities.

Proper documentation strengthens your mortgage application and increases approval chances.

Challenges of Getting a Self-Employed Mortgage in Canada

While self-employed individuals can qualify for a mortgage, the process often comes with additional challenges compared to traditional salaried employees. Lenders consider self-employed borrowers as higher-risk applicants due to the variability in income, complex tax filings, and difficulties in verifying consistent earnings. As a result, stricter lending criteria and additional documentation requirements often apply.

Understanding these challenges can help self-employed borrowers prepare in advance and improve their chances of securing a self-employed mortgage loan.

1. Proving Consistent and Reliable Income

One of the main challenges for self-employed borrowers is income verification. Traditional mortgage applicants can provide T4 slips and employment letters, whereas self-employed individuals must prove their income through tax returns and bank statements.

• Many self-employed borrowers write off expenses to reduce taxable income, which can make their income appear lower than it actually is.
• Lenders prefer to see stable or increasing income over at least two years rather than fluctuating earnings.
• Some lenders may require higher income documentation, such as business financial statements or contracts proving future revenue.

How to Overcome This Challenge:

• Work with an accountant to balance business write-offs while maintaining a strong income profile for mortgage qualification.
• Show consistent income deposits in bank statements, even if they do not match taxable income.
• Consider applying for stated-income mortgage programs, which allow borrowers to self-declare their income with additional lender requirements.

2. Higher Down Payment Requirements

Self-employed borrowers often face higher down payment requirements than salaried employees, particularly if they have non-traditional income sources or difficulties verifying income.

• For traditionally employed borrowers, a 5% minimum down payment is often sufficient for homes priced under $500,000.
• Self-employed applicants may be required to put down 10% or more, especially when working with alternative lenders.
• If self-employed income is not strong enough to meet conventional mortgage requirements, some lenders mayrequire at least 20-35% down to offset the risk.

How to Overcome This Challenge:

• Save for a larger down payment to strengthen your mortgage application.
• Work with a mortgage broker to find lenders who accept lower down payments for self-employed applicants.
• Consider joint mortgage applications with a co-borrower to improve approval chances.

3. Stricter Lending Criteria and Limited Mortgage Options

Many large banks follow rigid lending guidelines that can make it difficult for self-employed borrowers to qualify for a mortgage.

• Traditional banks require tax returns and high declared income, which may not reflect true earnings after business deductions.
• Some lenders place caps on debt-to-income ratios, making it harder for self-employed individuals with fluctuating earnings to qualify.
• Certain professions—such as freelancers and contract-based workers—may be considered higher risk and require additional documentation.

How to Overcome This Challenge:

• Work with a mortgage broker who can connect you with lenders specializing in self-employed mortgages.
• Consider alternative lenders or credit unions, which may offer more flexible lending criteria.
• If income is inconsistent, provide additional financial records (such as long-term client contracts or projected revenue reports) to strengthen your case.

4. Credit Score Requirements and Debt-to-Income Ratios

A strong credit score is important for all mortgage applicants, but it is even more critical for self-employed borrowers, as lenders may use it as an additional measure of financial stability.

• Lenders typically require a credit score of at least 680 for the best mortgage rates.
• High levels of personal or business debt can increase a borrower’s Total Debt Service (TDS) ratio, making mortgage approval more difficult.
• Missed or late payments, even on business loans or lines of credit, can negatively impact mortgage eligibility.

How to Overcome This Challenge:

• Pay down existing debts to improve your debt-to-income ratio before applying for a mortgage.
• Check your credit report for any errors and resolve them in advance.
• Avoid taking on new business loans or credit before applying for a mortgage.

5. Income Tax Considerations

Self-employed borrowers often take advantage of business deductions to lower their taxable income. While this is beneficial for tax purposes, it can work against them when applying for a mortgage.

• Lenders use declared income to assess mortgage eligibility, so excessive deductions may result in a lower pre-approved mortgage amount.
• Some lenders may only consider net income (after expenses), making it harder for business owners with high deductions to qualify for a mortgage.

How to Overcome This Challenge:

• Plan ahead – If you are considering homeownership, adjust your tax filings to show higher income for at least two years before applying for a mortgage.
• Work with a mortgage broker who can help find lenders that accept alternative income verification methods.
• If needed, consider stated-income mortgage programs, which allow borrowers to self-declare their income based on business performance.

6. Limited Access to Prime Mortgage Rates

Due to the added risk associated with self-employed applicants, some lenders charge higher interest rates or offer fewer low-rate mortgage products compared to traditionally employed borrowers.

• Self-employed applicants may not always qualify for the best rates offered by banks.
• Alternative lenders and private mortgage providers offer more flexible qualification criteria, but often at a higher interest rate.

How to Overcome This Challenge:

• Improve credit score and increase down payment to secure better mortgage terms.
• Shop around with the help of a mortgage broker to find competitive rates.
• Consider a short-term mortgage with an alternative lender and refinance later when financial records improve.

7. Difficulty Qualifying for Mortgage Default Insurance

If a self-employed borrower puts down less than 20%, they must obtain mortgage default insurance through CMHC, Canada Guaranty, or Sagen. However, qualification for insured mortgages can be more challenging for self-employed individuals.

• CMHC and other insurers may have stricter guidelines for self-employed applicants.
• Higher income documentation standards apply, which can result in denied applications for those with significant write-offs.

How to Overcome This Challenge:

• If possible, save for a 20% down payment to avoid mortgage insurance requirements.
• Work with a mortgage broker to find lenders that offer insured self-employed mortgage programs.
• If mortgage insurance is required, ensure that all income documentation meets insurer requirements before applying.

Final Thoughts: Overcoming Self-Employed Mortgage Challenges

While there are unique obstacles for self-employed borrowers, many lenders in Canada offer mortgage solutions specifically designed for business owners, freelancers, and independent contractors. By taking proactive steps—such as improving credit, increasing savings, and working with a knowledgeable mortgage broker—self-employed individuals can successfully secure a self-employed mortgage loan.

At Invis, we specialize in helping self-employed Canadians qualify for mortgages. Our mortgage brokers have access to lenders who understand self-employed income structures and can offer solutions tailored to your needs.

If you are self-employed and looking to buy a home, contact Invis today to explore your mortgage options and secure the best financing available.

How a Mortgage Broker Can Help Self-Employed Borrowers

A mortgage broker provides access to lenders who understand the unique financial situations of self-employed borrowers. Instead of applying to multiple banks—risking potential rejections—Invis mortgage brokers match you with lenders that offer flexible qualification criteria.

Benefits of Working with a Mortgage Broker

• Access to multiple lenders beyond traditional banks.
• Guidance on improving mortgage eligibility.
• Assistance in gathering and organizing financial documents.
• Negotiation of better mortgage rates and terms.

Why Choose Invis for Your Self-Employed Mortgage?

At Invis, we specialize in helping self-employed individuals qualify for mortgages by offering:

• Tailored mortgage solutions for business owners, freelancers, and independent contractors.
• Access to traditional lenders, credit unions, and private mortgage options.
• Competitive interest rates and flexible qualification criteria.
• Expert guidance from experienced mortgage brokers.

Get Started on Your Self-Employed Mortgage Today

Securing a mortgage as a self-employed borrower does not have to be complicated. With the right preparation and guidance from Invis mortgage brokers, you can qualify for a mortgage that fits your financial situation.

Contact Invis today to discuss your options and find the right self-employed mortgage loan tailored to your needs.