If you’re self-employed and planning to buy a home in 2025, you may already know this journey can come with more hoops to jump through compared to salaried employees. But here’s the good news: qualifying for a mortgage is absolutely possible! You just need to be prepared, understand how lenders think, and work with the right mortgage professional.
Why It’s Tougher for Self-Employed Borrowers
Mortgage lenders love predictability. With salaried employees, it’s easy: lenders look at pay stubs and employment letters, and that’s often enough to move forward. But for entrepreneurs, freelancers, contractors, and gig workers, income can fluctuate and isn’t always reported in traditional ways.
Lenders may see your income as “riskier” even if you make more than the average salaried worker. This is why understanding how to present your financials is key.
Here’s What Lenders Really Want to See
To qualify for a mortgage as a self-employed individual, lenders will typically ask for:
- Two years of personal income tax returns (T1 Generals)
- Two years of Notice of Assessments (NOAs)
- Business financial statements (if incorporated)
- Proof that taxes are up to date (no CRA or HST debt)
Some lenders will use your average net income over two years to determine what you can afford. Others may focus on your most recent year if income is trending upward.
What If You Write Off a Lot of Income?
Many business owners reduce their taxable income through deductions. While that’s smart from a tax perspective, it can work against you when applying for a mortgage.
Here’s where alternative and private lenders come in. These lenders look beyond traditional income verification. Instead of just using your net income, they may consider your gross business revenue or use a “stated income” approach where your declared income is supported by bank statements and business activity.
These mortgages often come with slightly higher interest rates and larger down payment requirements, but they can be a great fit if your financials don’t fit the standard mold. These lenders will typically want to see your bank statements for the last 6 to 12 months to verify your cash flow.
Tips to Boost Your Approval Odds
- Keep clean books. Organized and up-to-date financials make a big difference.
- Make sure your personal income taxes and HST accounts are up to date.
- Pay off personal and business debt where possible.
- Save for a larger down payment. More equity means more lender confidence and cheaper interest rates.
- Avoid major financial changes. Don’t open new credit or change your business structure right before applying.
- Work with a mortgage broker who understands self-employed clients long before you make an Offer on a home.
Bottom Line
Self-employed individuals can, and do, qualify for mortgages every day. The key is understanding how your income is viewed, being proactive about your financials, and partnering with someone who can guide you through the process.
If you’re thinking about buying this year and want a second opinion on your options, feel free to reach out. I’m happy to review your situation and help you build a plan that works!