Landing a mortgage is trickier for the self-employed than their salaried counterparts. Not only do self-employed people face higher interest rates and CMHC mortgage insurance premiums, they are also more likely to have their loan applications rejected outright. If you’re self-employed, you’re best off seeing a mortgage broker a few years prior to your purchase so you can make a plan.
It sounds counterintuitive, but you may want to keep tax deductions to a minimum for at least two years before applying for a mortgage. You’ll show more income on your tax return, which will make it easier to qualify. “It’s about foregoing some short-term tax savings in order to qualify for a future mortgage,” says Scott Plaskett, CEO at Ironshield Financial Planning. You want to show income stability, he says.
Keep in mind that the larger the down payment, the better your chances of getting a low-rate mortgage, as greater equity means less risk to your lender. While banks are fairly strict on their lending criteria, a mortgage broker can help you access other types of lenders that are more likely to approve your loan.