(April 27, 2023)
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Congrats on finding this valuable post! You’re probably here because your bank is being difficult with you because you are self-employed…right? I know exactly how you feel, but more importantly, I know how to help you!
Most mobile specialists and mortgage brokers only look outside the walls of a business to determine qualifying income for self-employed applicants. This might be enough to get you across the finish line, but if you’re a high-producing business owner, this method of qualification is extremely limiting and inadequate. Just because you are winning the tax game, it doesn’t mean you should bow to defeat with your mortgage qualification. Many lenders have programs that qualify self-employed applicants based on their Business Financials rather than solely on their personal income declarations as stated in their Notice of Assessments.
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Business Financial Statements versus Notice of Assessments
Back in the early 2000’s lenders used to simply request the most recent two (2) years Notice of Assessments to verify income for self-employed applicants. They would essentially look to see if there were any taxes owing, and if not, they would issue approvals on the spot, regardless of what the declared income was! The lending environment back then was free wheeling and rampant. Today it’s a different story. Rather than just assuming that a business owner is declaring a low income for tax purposes, lenders will request evidence of it in the form of either T1 Generals or Business Financials. But here is where the qualification failure begins. In most cases, your banker/broker submits an application for a maximum mortgage qualification based on a 2-year average of Line 150 of your Notice of Assessment. The lender may in fact be open to qualifying you for a higher amount after reviewing your Business Financials (or T1 Generals), but have simply refrained from suggesting anything further other than what you applied for! Unless your banker/broker requests otherwise, they are simply going to adjudicate what is provided to them – they are not salespeople. Your broker/banker is the salesperson and the onus is on them to formally request an escalated adjudication for a higher qualification amount.
Why don’t all broker/banker(s) request escalated adjudications that could lead to higher qualification amounts for self-employed applicants?
There are two simple answers to this question:
1. The personally declared income on the applicant’s Notice of Assessment is simply enough for what the applicant wants to purchase, therefore, no escalation is required as the applicant is satisfied.
2. The self-employed applicant begrudgingly accepts the approved mortgage amount and adjusts their expectation for a lower-priced property. So why then doesn’t the broker/banker request for an escalated adjudication? The applicant is clearly not satisfied with their mortgage amount, this is an ideal scenario to ask for an escalation! Do it! Come on, what’s the hold up!? Ready for the answer? Here it is…because they either don’t know about it, or they do not know how to read Business Financial Statements.
Without getting into detail about the inner workings of Business Financial statements and how it can specifically propel a self-employed applicant’s qualification amount, simply be aware that it is indeed a qualification method that exists and is available…it just needs to be initiated by your banker or mortgage broker! By the way, keep checking in or subscribe to my newsletter for future posts as I will eventually write another post that details the key qualification boosters within Business Financial Statements.
Wondering how much you qualify for based on your Business Financial Statements? Call or text Marko right now at 604-800-9593, or Click Here to schedule a call to find out if any of the senior-focused solutions above are a fit for you.
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Contact Marko, he’s a Mortgage Broker!
604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)
403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)
Email Me: gelo.m@mortgagecentre.com
@markogelo (Twitter)
