When Amanda and Brad relocated to Sault Ste. Marie, Ontario, they were just getting started on their own entrepreneurship journey starting Thrive Tours
. They experienced first hand some of the challenges of securing a mortgage as new business owners. While they knew they could afford a mortgage, they had limited options to choose from.
Let's say you have a down payment saved up, can afford a mortgage in your ideal home shopping budget, and have a credit score that's above 680. As an employee, as long as you have more than 6 months of work history and are not on probation, there's a high likelihood you'll be able to find a mortgage with a traditional bank. As a business owner, most lenders will require you to have at least 2 years of operating history. To complicate matters, most lenders will usually use your taxable income (line 150 of your T1 tax return) from the past 2 or 3 years to determine the mortgage amount you can qualify for. This could lower the amount you can borrow for a home purchase, since as a small business owner, you are motivated to deduct many expenses from your gross income to minimize taxes payable.
Check out this article
for a detailed overview of different lenders’ policy on self-employed mortgage requirements.