Calculating Income. Part Two
In our last post, part one of our two part article on calculating income, we looked at full- and part-time employment income requirements when applying for a mortgage. In part two, we’re reviewing what self-employment income verification may entail as lenders calculate your income in their review of your mortgage application.
self-employed
If you are self-employed, the requirements for income documentation are quite different than verifying income as an employee. Self-employed applicants will likely need to provide:
- Last Two or Three Years’ T1 Generals: This is your income tax return. The full document is typically 25 pages or more, and you’ll need to include all its schedules. One of the schedules is the Statement of Business Activities, which is used to illustrate business income versus expenses for some self-employed individuals, but not all.
- Notices of Assessment (NOA) from Canada Revenue Agency: You will also need to provide the previous two or three years’ NOAs as a self-employed mortgage applicant. CRA sends this as your verification taxes have been filed. They show whether you have a balance owing, and if so you’ll need to verify outstanding balances have been paid.
- If Incorporated: Articles of Incorporation and your last two year’s financial statements
- Sole Proprietor: a business license is sometimes a requirement.
- More recently lenders have begun to request recent contracts, bank statements, or GST returns to verify ongoing business activities.
As mentioned in part one, not all mortgage applicants look the same. Lenders may ask for more or less than what we’ve covered here. If you don’t meet some of the criteria we’ve covered, there are often exceptions to the rule. Connect with your trusted Mortgage Consultant to review your options and to ensure you take advantage of opportunities you might not otherwise have realized may apply to you.