Can I get a mortgage if I’m self-employed?
SELF-EMPLOYED AND HOME HUNTING? HERE’S HOW TO WIN A MORTGAGE IN MILTON
Can I get a mortgage if I’m self-employed? Short answer: Yes — but you must prove your cash flow, manage taxes, and prepare stronger documentation than a W-2 employee.
Why this matters for Milton home sellers and buyers
Milton is one of the fastest-growing communities in the Greater Toronto Area. Buyers who are self-employed face scrutiny from lenders. Sellers who are self-employed and planning to buy again need a plan before listing. The market in Milton moves fast. If you want to sell and buy without surprises, understand exactly how lenders view self-employed income and what steps force approval.
How lenders evaluate self-employed mortgage applicants (plain and direct)
- Income stability: Lenders want to see at least 2 years of consistent net income. That’s usually via Notice of Assessment (NOA) and T1 General filings.
- Verifiable income: They prefer income declared on tax returns, not just bank deposits. Large tax deductions reduce reported income and can hurt approval.
- Debt service ratios: Gross Debt Service (GDS) and Total Debt Service (TDS) matter. Lower debt and higher down payment help.
- Cash flow and reserves: Lenders want cash reserves for mortgage payments and closing costs.
- Credit score and history: Same standard as salaried employees — better credit, easier approval.
Types of lenders and programs for self-employed borrowers
- Big banks (traditional): Prefer full tax returns and smooth earnings. May require two years of NOAs. Tighter guidelines.
- Credit unions: More flexible; can look at relationship banking and business stability.
- Monoline lenders and alternative/private lenders: Faster and more flexible but higher rates and fees. Use for bridge loans or when traditional approval fails.
- Broker access: A mortgage broker who works with multiple lenders increases your odds. They match your profile to the lender most likely to approve.
Actionable checklist to get approved — use this before listing or submitting an offer
- Organize two years of tax documents: T1 Generals, NOAs, and business financials.
- Prepare year-to-date profit and loss (P&L) and balance sheet if you run a corporation.
- Keep 3–6 months of bank statements ready to show cash flow.
- Improve Net Income on paper: shift income from dividends to salary if your accountant advises — salary shows stable income on NOAs.
- Reduce discretionary debt and clear high-interest lines of credit.
- Boost your down payment. Higher down payment lowers lender scrutiny and may avoid mortgage insurance.
- Get pre-approved through a broker, not just online calculators.
- Bring a client letter or CPA letter that confirms your ongoing contracts and income reliability.
Local Milton insights and data-driven angle
- Demand and inventory: Milton’s housing demand remains strong due to limited new supply and spillover from the Toronto market. That creates urgency — offers can close quickly and conditional timelines matter.
- Pricing pressure: Sellers get higher offers when buyers are pre-approved. Self-employed buyers who aren’t pre-approved risk losing out.
- Time to close: Lenders typically need 30–45 days for traditional underwriting. Alternative lenders or bridge financing can close faster for transactions that must align tightly with sale closing dates.
What this means if you’re a self-employed seller in Milton
- If you plan to sell and buy another property in Milton, get mortgage pre-approval before listing. Without it you: lose negotiating power, can’t make unconditional offers, and may be forced into bridge financing at higher cost.
- Porting an existing mortgage: If your current mortgage allows porting, you can carry its rate to the new purchase — but the new lender still needs to approve your income.
- Conditional offers tied to selling your current property must include proper timelines. Lender underwriting can extend the conditional period; prepare for that in your listing strategy.
Tax strategies that affect mortgage approval (use with your accountant)
- Salary vs. Dividends: Salary increases reported taxable income and shows stronger NOAs. Dividends lower reported employment income and can reduce mortgage eligibility.
- Expense timing: Avoid accelerating expenses just before applying. Lower net income on tax returns triggers more scrutiny.
- Incorporation: Corporations can shelter income, which can be good for taxes but bad for mortgage qualifying. Lenders want personal income that’s reported through T1.
Bridging options for sellers who need time between sale and purchase
- Bridge financing: Short-term solution to cover down payment until your current home closes. Higher rates; use only if necessary.
- HELOC or second mortgage: If you have equity, a HELOC can fund a down payment or closing costs.
- Rent-back agreements: Selling with a rent-back can time closings, but lenders still verify your income for the new purchase.
How to present yourself to lenders — the final 90% that gets the mortgage done
- Truth matters: Full disclosure speeds underwriting. Hiding income sources or large deposits causes delays or denials.
- Documentation ladder: Provide primary documents first (NOAs, T1), then secondary (bank statements, contracts). It’s cleaner and faster.
- Use a broker who knows Milton lenders: Local knowledge matters. Milton lenders and credit unions know the local economy and can be reasonable with proven self-employed income.
Case scenarios (realistic examples you can relate to)
- Scenario A — The independent contractor: 3-year history, fluctuating invoices, files as sole proprietor. Solution: Provide 2 years of NOAs, 6 months of bank statements, and a CPA letter confirming contracts. Use a broker to place with a credit union.
- Scenario B — The small business owner paid in dividends: Low personal taxable income. Solution: Shift to salary before year-end or work with lenders who accept corporate financials with a CPA comfort letter. Increase down payment.
- Scenario C — The seller who must close fast: Needs bridge financing. Solution: Apply to alternative lender for a short-term bridge loan while preparing traditional lender docs for permanent financing.
Common documentation lenders will ask for
- Personal tax returns (T1 General) and NOAs — usually 2 years.
- Year-to-date profit and loss and business bank statements.
- HST/GST filings if applicable.
- Client contracts or recurring revenue agreements.
- Personal bank statements (3–6 months).
- Identification and property documents for sellers.
Pricing strategies for Milton sellers who are self-employed
- Get conditional offers that match your financing timeline. If traditional mortgage approval takes 30–45 days, set contingencies accordingly.
- Use pre-approval letters to boost buyer confidence when you present offers on your next home.
- If you expect reduced qualifying income because of dividends, price competitively and assume you may need to pay a higher down payment.
How Tony can help (quick, direct call to action)
I work directly with buyers and sellers in Milton to make the financing simple and fast. If you’re self-employed and selling or buying, I’ll connect you with mortgage brokers and lenders who know how to qualify your income. Contact me for a free mortgage readiness review.
Tony Sousa — Local Realtor
Email: tony@sousasells.ca
Phone: 416-477-2620
Website: https://www.sousasells.ca
FAQ — Straight answers to the questions I get every week in Milton
Q: Can a self-employed borrower qualify for CMHC-insured mortgage?
A: Yes. To qualify for an insured mortgage (5% down for owner-occupied), lenders usually require two years of tax returns and NOAs. Documentation must show enough income to pass the mortgage stress test.
Q: What if my tax returns show low income because of deductions?
A: You can present additional documentation: year-to-date financials, client contracts, bank statements, and a CPA letter. Consider restructuring income in the future (salary vs dividends).
Q: How long does underwriting take for self-employed applicants?
A: 30–45 days is typical for traditional lenders. Credit unions or alternative lenders may move faster. Do not rely on verbal pre-approval — get it in writing.
Q: Can I use corporate income to qualify?
A: Yes, but lenders will want corporate financials and a CPA letter. Your personal T1 remains crucial. Corporations can complicate underwriting, so bring clean, organized documents.
Q: Is a mortgage broker necessary?
A: Not strictly, but highly recommended. Brokers have access to lenders who specialize in self-employed profiles and can save time and money.
Q: What if I’m a contractor with seasonal income?
A: Lenders will average income over the last two years. Strong evidence of future income (contracts, recurring clients) helps.
Q: Do I need more down payment if I’m self-employed?
A: Often yes. A larger down payment reduces lender risk and may get you better terms. It can also help you avoid mortgage insurance.
Q: How can sellers in Milton avoid financing delays when buying their next home?
A: Get pre-approved with full documentation before listing. Time closings with lender expectations. Consider backup financing options like HELOC or bridge loan.
Final word — cut the confusion, not your opportunities
If you’re self-employed and serious about buying or selling in Milton, don’t treat financing as an afterthought. Preparation wins. Prepare your documents, work with a broker who knows self-employed files, and coordinate closing timelines before you list.
Contact for a free mortgage readiness review and local market strategy session:
Tony Sousa | tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
Ready to sell or buy in Milton? Get pre-approved and list with confidence today.
