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When you are self-employed, the goal is to pay as little income tax as possible by taking as many write-offs as possible. While this may reduce, or eliminate, the income tax you pay, it also eliminates your ability to prove your income to the bank.
Only a few lenders know that this is just smart business and have designed mortgage programs where you do not have to prove any income. These programs are often called "Stated Income" mortgages because you simply "state" your income. In most, but not all, cases you will, however, have to provide your Revenue Canada Notice of Assessment (NOA) to prove that there are no income taxes outstanding.
"Stated Income" programs are excellent for clients that do have a good income but simply cannot prove that income. You should never overstate your actual income. This will often cause unnecessary financial hardship, stress and potentially ruin your credit. When you are self-employed, your good credit is the key to obtaining additional credit.
You do need to have good credit and at least 5% down payment. You only need to be in business for as little as one day. However, you do need to prove you are in business and will require some documentation such as Business Licences, Articles of Incorporation, Joint Registry of Stock, etc.
Other lenders have "Low Doc" mortgages where they require either very little or "unconventional" income documentation. On top of NOAs and proof of being in business for at least 2 years, some lenders require the last 12 months of your business bank statements showing your ability to manage your finances with no NSF cheques and your Gross Deposits/Income. Other lenders will require your last 2 years T1 Generals and will use your average net income PLUS add backs on a "makes sense" basis specific to your type of business.
If you have a 15% to 25% down payment, there are other "Equity" lenders who require virtually no income documentation. They simply require a letter from you stating your income. Credits: www.bestinmortgage.com
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