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To Self-Employed individuals – Financing options at risk ?

Reports from the Office of the Superintendent of Financial Institutions (OFSI) suggest that lenders aren’t severe enough with their guidelines when it comes to the Business for Self “stated income” programs.  With that, the Minister of Finance is closely observing that housing market to determine is changes are required.

Changing the rules for the self-employed may not be economical – one in six workers (or 15.7 per cent) is self-employed, according to Statistics Canada.  This number has increased by nearly 12 per cent in the past decade while the overall
augmentation of the labour force was 18 per cent.  In 2011 alone, the number of self-employed Canadians increased by 2%, that’s double the growth rate seen in paid employment.  Evidently, this is a growing tendency.

This type of work comes with its challenges; there is a wage uncertainty, questionable outcome to projects and there is no telling what each work week holds for a schedule.   Entrepreneurs work without pension plans or safety nets, yet they are considered one the backbones of Canada’s economy.  These individuals are making our Country a competitive economy through their hard
work and dedication, yet they face an uphill battle when purchasing a home.  It is unfortunate that the government would
consider penalizing a sector that plays a virtual role in the growth of our economy.

Already, some lenders have eliminated the “stated income” programs that allowed self-employed customers to qualify for high ratio mortgages because those programs are at risk.  It is uncertain whether the rules will change for these individuals.  It’s likely other lenders will reject these deals as well.

Rules have already tightened for mortgage borrowers over past years.  Lenders strictly require income verification (satisfactory to them) and further documentation to prove self-employment.  They will consider, in average, the past few years of income and demand plausible evidence of eventual revenues.  In addition to stiff income conditions, business for self clients sometimes need a higher down payment and credit score.

All of this does not mean that there will no longer be programs for self-employed individuals, but that the rules will tighten up and that it may be much more difficult to get approved for a mortgage.

Our message to you today, get it approved now before it changes!

For any questions or concerns, please do not hesitate to contact us!