Traditionally, mortgage pathways have been structured with a preference for applicants possessing a regular, predictable income. This structure tends to favour salaried employees who can easily provide evidence of a steady paycheck.
However, as the number of self-employed individuals in the workforce grows, the mortgage industry is adapting. This is leading to the development of more flexible and varied mortgage options.
If you are a self-employed individual who is having difficulty obtaining a mortgage, these are some options you can explore!
Consider Alternative Lenders
When traditional banks turn down mortgage applications from self-employed individuals, the world of alternative lending often presents some hope. These alternative lenders stand out for their flexibility and openness to considering unconventional forms of income verification.
This approach is especially beneficial for those whose earnings might not be consistently reflected in traditional financial statements or pay stubs, such as freelancers, contractors, or small business owners.
Larger Down Payments
Enhancing the size of your down payment can significantly improve your appeal to mortgage lenders. A substantial down payment does more than just demonstrate your financial commitment to the property; it directly influences the loan-to-value (LTV) ratio.
For self-employed individuals, who might face skepticism from lenders due to fluctuating income or unconventional financial records, a larger down payment can be particularly persuasive.
It acts as a strong signal of financial stability and capability, and it can compensate for aspects of their application that are less traditional or harder for lenders to evaluate, like irregular income patterns.
Government Programs
The government provides support to aid various homebuyers, including self-employed individuals, through government-backed programs.
One of the key institutions in this realm is the Canada Mortgage and Housing Corporation (CMHC). The CMHC offers a range of programs and options specifically designed to be more accessible to self-employed individuals who may face challenges in securing traditional mortgages.
These government-backed programs are tailored to address the unique financial circumstances often associated with self-employment. For example, they may offer more lenient criteria regarding income verification and credit history, acknowledging the fact that self-employed individuals might not have the typical proof of income or a traditional employment trajectory.
Having a Co-Signer
Adding a co-signer or guarantor to your mortgage application can significantly enhance your chances of approval. This option involves having another person, usually a close family member or a trusted individual, agree to take responsibility for the loan if you are unable to make the payments.
The presence of a co-signer or guarantor provides a safety net for the lender. It reduces their risk because there is an additional party with a financial stake in the loan. This person must have a stable income and good credit history, which can compensate for any perceived instability in the self-employed applicant's income.
Self-Employed? Arise Mortgage Can Support You!
With the right approach and understanding of the various options available to you, securing a mortgage as a self-employed individual is very much a viable goal.
Embrace the freedom of self-employment while responsibly planning your financial future, and you’ll find that even the dream of home ownership is well within your reach.
Get in touch with our team today to discover how we can help you achieve your homebuyer dreams.