Someone recently asked me, “Can I qualify for a mortgage if I just started a new business?”.
They had been working in the same industry for five years and decided it was time to go out on their own.
The good news is… YES!
Some lenders can make exceptions for people who have recently become self-employed. Even if you’ve just started your business! Lenders might look at your previous income and your business’s current financials to estimate your borrowing power.
How Lenders Look at New Business Owners
Lenders usually prefer you to have been running your business for at least 24 months. There are exceptions though, especially if you’ve been in the same line of work for a while. Lenders will often consider your previous work history in the same industry, which shows them that you have experience and a reliable income background.
If you’ve been self-employed for less than 24 months, here are a few key factors that can help you qualify for a mortgage:
- Cash reserves: Having some savings can show the lender that you’re financially stable.
- Predictable earnings: If your business has consistent revenue, that can give lenders more confidence in lending to you.
- Industry experience: Since you’ve been in the same line of work for five years, that will work in your favor.
- Education and training: Your background in the industry can also be a plus when lenders are deciding whether to approve your mortgage.
What Documents Do You Need?
If you’re a new business owner, you’ll need to provide proof of income. Here are some documents that lenders may ask for:
- T1 General along with your Notice of Assessment (NOA)
- Statement of Business or Professional Activities (T2125) with the NOA
- Some lenders may also allow you to “gross up” your income by 15% or add back certain deductions like business-use-of-home or motor vehicle expenses. This helps give a clearer picture of your income for mortgage approval.
Bottom Line
Even if you’re newly self-employed, you can still qualify for a mortgage. Lenders understand that many people go into business for themselves after years of working in the same industry, and they can be flexible with their policies. Just make sure you have your documents in order and show that your business is on solid footing.
If you’re wondering about your mortgage options as a new business owner, feel free to reach out to me. I’m here to help!
Schedule a strategy call with me here: