How To Get Mortgage-Ready When You Are Self-Employed
How to get mortgage-ready when you are self-employed: a practical guide for semi-custom clients
Being your own boss is great, but the mortgage rules were not written with freelancers, contractors, and small business owners in mind. Here is a short, usable guide you can use if you are self-employed. It explains what lenders look for today, a checklist of the documents that matter, a few lesser known ways to boost qualifying income, and when a broker should steer a client to alternative lending.
Quick snapshot
Most prime lenders expect two years of filed personal tax returns and Notices of Assessment to verify self-employed income.
Borrowing capacity is still assessed with the standard stress test so lenders confirm affordability using the minimum qualifying rate required by regulators.
There are more flexible products now, including self-declared income and alternative lender solutions, for clients who do not have two tidy years of filings. These options usually cost more but can get a deal across the line.
Lenders may allow reasonable gross-ups and add-backs for non-taxed income to better reflect cash flow when the documentation supports it.
Self-employment is common; over two million Canadians work for themselves which makes this a frequent conversation for brokers.
Why self-employment changes the mortgage playbook
Lenders want repeatable, verifiable income. A salaried borrower hands over pay stubs and a letter of employment. A self-employed borrower must convert messy cash flow into proof that the business produces sustainable income. That means tax returns, Notices of Assessment, business banking history, and sometimes profit and loss statements. The more complete and consistent the file, the more lenders and better rates become available.
A practical document checklist your broker will ask for
Personal tax returns T1 and Notices of Assessment for the past two years. These are the foundation for most prime lenders.
Business bank statements six to twelve months, to show cash flow and deposits.
T1 General schedules and any corporate financials if you incorporate. Full pages not summaries.
GST/HST filings, business license, and invoices where relevant. These help when income is seasonal or project based.
A written note explaining any one-time large tax deductions or inconsistent income years. Lenders like context as much as numbers.
Three practical moves that often improve approvals
Average income across two years rather than relying on one strong or weak year. Lenders commonly use a two year average of line 150 from the NOA.
Use acceptable gross-ups and add-backs for non-taxable benefits or predictable income streams. A modest gross-up can convert ownership perks into qualifying income when properly documented.
Substitute clean business bank statements and contracts for scarce tax documentation when discussing alternative lender programs. These lenders will price for risk but solve timing gaps.
When to stay with prime lenders and when to consider alternatives
Stay with prime lenders when you have two clean years of NOAs and stable cash flow. You will get better rates and full product choice. If tax filing strategies make reported net income look low, or if the business is young and cash flow is strong but paperwork is thin, then alternative or self-declared programs can bridge the gap. They cost more but can preserve the purchase or refinance timeline. A broker should always model the long term cost difference before recommending a switch.
A short, realistic example
A freelance graphic designer has two years of NOAs showing modest net income after business expenses, but her bank statements show steady monthly deposits that indicate larger cash earnings. A broker can ask for a gross-up, include certain recurring deposits, and present the file to a lender who accepts those add-backs. The result can be approval at a reasonable rate rather than an expensive private mortgage. The devil is in the documentation and the lender selection.
Simple checklist to get you started
Gather two years of T1 General tax returns and Notices of Assessment.
Export the last six to twelve months of business bank statements.
Make a short note that explains any unusual tax deductions or one-off income events.
Ask your broker for a two-option comparison: a prime lender scenario using verified income and an alternative lender scenario that uses bank deposits or self-declared income.
Self-employment is not a barrier, it is a file type. Preparation and the right lender matter more than hoping one bank will say yes. If you are looking for a semi-custom quote, send renewal dates, purchase price, down payment details, and the two years of NOAs. I can then show the true cost comparison between prime and alternative routes, and recommend the cleanest path to approval.
Contact us today at 204-997-5021 or mcabral@204mortgages.com to learn more!
