Last week one of the Mortgage Brokers that I work with sent me an update that read: Guidelines Tighten for Self-Employed Borrowers
Immediately, that caught my interest, because not only are many of my clients Self Employed... But as a Realtor, so am I.
In the past couple of months, there have been many changes to the rules for qualifying for a mortgage. These changes for self employed borrowers, are just the last few, that will take place on April 9, 2010.
Here's what the went on to read:
Effective April 9, 2010 self employed borrowers with 3 yrs in the same business as well as commissioned-income borrowers will be required to confirm their income and will not be eligible for CMHC's Self Employed product without traditional validation of third party income. Additionally the maximum loan to value (LTV) ratio under CMHC's Self-Employed product without traditional validation of third party income will be reduced from 95% to 90% on purchases and from 90% to 85% on refinances.
Right away, I phoned Cory Lewis with Jencor Mortgage Corp. to find out more... From my discussion with her, I gathered that the critical factor here is the way that your income, as a self employed borrower is reported to the lender.
Self Employed people benefit when it comes to tax time, because they're able to claim many expenses as costs associated with doing business. Therefore, they pay tax only on the income that is not spent during the course of doing business. As a result, their "Income" appears to be much lower on their Notice of Assessment from the Canada Revenue Agency.
However, there are cases where income is "Stated" to the lender, rather than being verified by documents such as a Notice of Assessment. This is done to account for the fact that the Self Employed borrower actually makes more than may be shown after tax deductions have been taken off their income. It allows the borrower to qualify for more based on their "Stated Income," however, these are the borrowers that the new rules coming in April will affect the most.
I'm not a mortgage professional, so I don't want to go any further on this topic... But I would suggest you speak with a mortgage professional to find out more, if this affects you. I welcome your comments if you would like to provide any further infomormation on this topic.
Cory Lewis and I will be hosting a Free Seminar for First Time Home Buyers in Calgary on March 25th. With all of the changes taking place in the coming month, it's important to find out how these changes may affect you, and your ability to obtain a mortgage for your home. Cory Lewis is a Mortgage Associate, with Jencor Mortgage Corporation. She's not only a fantasitic resource, she's really great to talk to. She will be available to answer your questions on what it takes to qualify for a loan
If you live in Calgary... Join us! Here's the information:
Thursday March 25, 2010 at 7:00pm
Jencor Mortgage Corporation
305, 1822 10th Avenue SW. Calgary, Alberta
Admission is Free, but seating is Limited, to be sure to Register Early, to reserve your seat.
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