How Can Self-Employed Borrowers Qualify for a Mortgage in Vancouver?
If you are one of the many entrepreneurs, freelancers, or contractors driving Vancouver's economy, you know the hustle required to be your own boss. You also likely know the frustration of walking into a major bank, proud of your business revenue, only to be turned down for a mortgage because your taxable income looks "too low."
It is the classic self-employed paradox: you work with your accountant to minimize your taxes by writing off expenses, but that same strategy lowers the income lenders use to qualify you for a home loan.
The good news? Being self-employed does not mean you are locked out of the Vancouver housing market. As a Mortgage Broker in Vancouver with over 15 years of experience, I specialize in navigating the complex landscape of self-employed financing. Whether you are buying a condo in Yaletown or a detached home in North Vancouver, there are specific programs designed just for you.
Why Traditional Banks Struggle with Self-Employed Applicants
To understand the solution, we first have to understand the problem. Traditional banks rely heavily on "standard" income verification—usually a T4 slip from an employer. When you are an employee, your income is predictable and easy to verify.
When you are self-employed, your income fluctuates, and your "Net Income" (line 15000 on your tax return) often doesn't reflect your actual cash flow or ability to repay a loan. Banks often view this as "high risk." However, specialized lenders and insurers understand that a business owner's gross revenue tells a different story than their net taxable income.
3 Proven Pathways to Mortgage Qualification for Business Owners
There isn't a "one-size-fits-all" approach for business owners. Generally, qualification falls into three main buckets depending on how much documentation you can provide and how you pay yourself.
1. Traditional Qualification (The "A" Side)
If you have a long history of self-employment (typically 2+ years) and you claim a significant amount of personal income on your taxes, you may qualify for a standard mortgage with prime rates. In this scenario, we use a two-year average of your Notice of Assessment (NOA) income.
The "Add-Back" Advantage: Even with traditional lenders, we can sometimes "gross up" your income by adding back non-cash deductions like Capital Cost Allowance (CCA) or business-use-of-home expenses. This requires a skilled broker to present your file correctly to the underwriter.
Incorporated individuals may be able to work from their business financials based on a two year average. However the company must be owned by the individual outright or by all parties on the the mortgage application.
2. Stated Income Programs (Business for Self)
This is the most popular option for many Vancouver entrepreneurs. Insurers like CMHC, Sagen (formerly Genworth), and Canada Guaranty offer "Business for Self" (BFS) programs. These allow you to "state" your income based on what your business actually generates, rather than just what you declare personally for taxes.
Key Requirements for Stated Income:
You typically need a minimum down payment of 10% (unlike the standard 5% for employees).
You must prove self-employment for at least two years.
You must have a clean credit history.
You need to provide documentation showing your business is generating revenue (e.g., business bank statements, GST returns, or financial statements).
3. Alternative and Private Lending Solutions
Sometimes, tax returns simply do not show enough income to qualify for "A" lending, or perhaps your business is too new (less than 2 years old). This is where "B" lenders and Private Mortgage Lending options become essential.
Alternative lenders focus on the equity in the property and the cash flow of the business rather than strict taxable income ratios. While interest rates may be slightly higher than prime rates, these products are excellent short-term solutions. They allow you to get into the market, build equity, and transition to a traditional lender once your tax returns reflect higher income.
Documentation Checklist: What You Need to Prepare
T1 General Tax Returns: The last two years (all pages).
Notices of Assessment (NOA): The last two years.
Proof of Business Ownership: Articles of Incorporation or Business License.
Financial Statements: If incorporated, your accountant-prepared financial statements for the last two years.
Bank Statements: 6 to 12 months of business bank statements to prove cash flow.
GST/HST Returns: To corroborate revenue.
Proof of Down Payment: 90 days of bank history showing the accumulation of funds.
Comparison: Traditional vs. Stated Income vs. Alternative
Here is a quick breakdown of how the different lending tiers compare for self-employed borrowers in BC.
| Feature | Traditional (Insured) | Stated Income (BFS) | Alternative / Private |
| Income Used | 2-Year Average of NOA (Taxable Income) | Reasonable Estimate based on Gross Revenue | Business Cash Flow / Bank Statements |
| Min. Down Payment | 5% (on first $500k) | 10% Minimum | 20% - 35% Minimum |
| Interest Rates | Best Prime Rates | Competitive (Slightly higher insurance premium) | Higher than Prime |
| Documentation | High (Tax heavy) | Moderate (Revenue proof) | Flexible (Equity focused) |
Leveraging Rental Income for Qualification
Did you know that self-employed borrowers can also use rental income to boost their borrowing power? If you are looking at Home-Rental Purchases—such as a home with a basement suite or a laneway house—lenders will allow a portion of that potential rent to be added to your income.
In a high-cost market like Vancouver, this "mortgage helper" can be the difference between qualifying for the home you want and settling for less.
Why Work with a Broker Instead of a Bank?
When you walk into a bank, you are speaking to an employee who can only offer you that specific bank's products. If you don't fit their specific "box," they decline you.
As an independent broker, I work with over 50 different lenders, including:
Major Banks (TD, Scotiabank, etc.)
Credit Unions (often more flexible with BC business owners)
Monoline Lenders (specializing in mortgages only)
Private Lenders
I know which lenders are "self-employed friendly" and which ones will scrutinize every expense. I structure your application to highlight the strength of your business, ensuring you get the best possible terms.
Additionally, if you are an existing homeowner looking to access equity for your business, we can discuss Mortgage Refinances & Renewals to pull cash out at a lower rate than a business loan.
Frequently Asked Questions (FAQs)
1. Can I get a mortgage if I write off most of my income?
Yes but depending if your company is a Sole proprietor or incorporated there can be very different approaches that can create very big differences. Planning well in advance is a priority for people in this position.
2. How long do I need to be self-employed to qualify?
Most lenders require a two-year history of self-employment to establish income stability. However, if you have transitioned from a salaried job to self-employment in the same industry, some lenders may make an exception with less than two years of history. Private lenders can also assist if your business is brand new.
3. Are the interest rates higher for self-employed mortgages?
Not necessarily. If you qualify under a standard program or a Stated Income program with a mortgage insurer (like CMHC or Sagen), you can access competitive prime rates. If you require an "Alternative" or "B" lender because of credit issues or lack of documentation, rates will be higher than prime, but often still lower than business loans or credit cards.
4. Does my corporation's income count, or just what I pay myself?
It depends on the lender. Some lenders will look at your corporation's financial statements and allow us to use a portion of the company's net profit in addition to the salary/dividends you pay yourself. This is a massive advantage for incorporated professionals (doctors, lawyers, consultants) who leave money in the corporation for tax deferral.
5. What if I owe money to the CRA?
Generally, mainstream lenders will not approve a mortgage if you have outstanding income tax arrears. You will need to pay these off before closing. However, we can sometimes arrange a Private Mortgage to help you pay off the CRA debt, consolidate your finances, and then transition you back to a traditional lender later.
Ready to Secure Your Mortgage?
Being self-employed shouldn't be a barrier to homeownership in Vancouver. It just requires a different strategy. With 15 years of experience helping local business owners, I know how to present your file to get the "Yes" you deserve.
Don't let a bank's rigidity stop your real estate goals. Let's review your numbers and find the right lender for your unique situation.
Contact Chad Watts Today for a Free Consultation
Or call me directly at 778-773-6631
Compliance & Disclaimer: The content provided in this blog post is for informational purposes only and does not constitute financial, legal, or tax advice. Mortgage qualification criteria, interest rates, and lending guidelines are subject to change without notice. Please consult with a professional mortgage broker to discuss your specific financial situation. Services provided by Chad Watts, Mortgage Broker at TMG The Mortgage Group.
