OCT. 2018 – CMHC helps the SELF EMPLOYED Get Mortgages! – Keepin’ It Realtor with Brad McCallum

OCT. 2018 – CMHC helps the SELF EMPLOYED Get Mortgages! – Keepin’ It Realtor with Brad McCallum


– Hey, are you one of those self- employed Canadians who tried to get a mortgage and got turned down? Did the banks tell you: – No! No! No! No! – Buying a home while being self-employed just got easier. But understanding if these new CMHC changes apply to you, though, has not. That’s why I’m here, to help you out. Now, I’ve always been self-employed and applying for financing is just one of the most frustrating processes that you could go through. People that would work
for my company before could buy a new house. But me? It was just so much harder, super frustrating. Now, the CMHC, the Canada Mortgage and
Housing Corporation, has announced new policies to help self-employed people
qualify for mortgages. Now why is this such a big deal? Because 30% of the working population is self-employed in Canada. But that is estimated to grow to 45% in just the next two years. So when rules are announced that give greater respect to the freelancers,
independent contractors, the small business owners,
and the on-demand workers, it has the potential to
help a lot of people. Will these rules help
you buy your first home? Maybe refinance your existing home? Let’s take a look. First off, if you wanna
buy a home in Canada with less than 20% down payment you are required to purchase home default insurance from the CMHC. Now, this is an insurance that protects the lenders from you not being able to pay your mortgage. And this is true for everyone, not just self-employed people. Some lenders require the
home insurance to be bought, regardless of how much is being put down because, remember, it’s
the lender’s criteria that needs to be met. Now, these rules are for people who have been self-employed for only two years or less. So if that’s not you, they don’t really apply. And the reason for that is because after that amount of time,
a self-employed person can more easily produce the documents that show their income. But, prior to this,
it’s far more difficult. So, if this does apply to you, and it does apply to many, there are new factors that the CMHC are suggesting can be used by lenders to support their decision
to issue a mortgage. The CMHC said those factors could include such things as acquisition of an established business. Now, of course, that makes sense, right? If a business has been profitable and have been around for a while, then it’s likely to continue to be so. So it’s not brand new and not the same risk as a new venture. The next criteria is
sufficient cash reserves. So the message here, guys, is just simply save your money. If you wanna own a home
and start a business, then you’re going to
need to plan in advance. You’ve taken a risk, now you’re asking the banks to do so, too. So having savings to back it all up, it reduces the lender’s exposure and now, instead of just being dismissed based on the fact that
you’re a brand new business, you’re application can be considered on a case-by-case basis. What is sufficient cash reserves? I don’t know. But it depends on the
mortgage you’re getting and it’s going to be looked at simply by your mortgage broker and by the individual lenders. Predictable earnings. Now this is a big one. There are a lot of jobs where you may be an independent contractor but you are steadily working and making a predictable return. Now for these people, the old way of doing things were just frustrating. It just didn’t feel like it made sense. And now, if you can
show that your earnings are predictable and consistent, then your application can be considered. The next criteria is previous
training and education. This is another obvious one. Like doctors, for example, they’re often small business owners. If your training and
education has set you up on a career path that leads to success, and you’re already on your way but haven’t put in the
time required by lenders, you may now be able to
qualify earlier along the way. So if you’re self-employed and you’ve applied for a mortgage, it can feel a bit like you’re just fully naked, fully exposed. They want to see everything. “Hey, what did you spend
that $200 on last month? “Why was there a deposit to your account “for $600 on May 17, 2017?” Right? But now there’s a broader range of document options that exist that could be used to satisfy the income and employment requirements to qualify self-employed
borrowers for a loan. One. The first document is a notice of assessment that is accompanied by a T1 general tax form. Two. Proof of income statement from the Canada Revenue Agency. And three. A T2125. It’s a statement of business and professional activities. In reality, if you are self-employed and have been for some time and still don’t qualify, it might have nothing to
do with those requirements. It could be your credit score, your debt load, and the fact that, in the last decade, we went
through two major recessions. Don’t give up hope, though. Getting approved for a
mortgage is all about understanding your finances and then setting up a plan to work towards that goal. Believe me, it can be done. I’ve been a self-employed business owner for a long time and had to play by the old rules and it was challenging. But if you make a plan
and you stick to it, you can also achieve home ownership. For many people, owning your own home, it’s part of the Canadian dream. Working for yourself, carving your own path, building a business. This is also part of that dream. So why would you be penalized for that? Because it’s the hard work and long hours of those entrepreneurs that create new opportunities and
jobs for other Canadians. Hopefully, these new rule
changes will make it possible for Canadians everywhere to realize their dream of home ownership. If you’re curious if these rules apply to your specific situation, or if you have any questions at all about the housing market, buying your first home, or what you can do to set yourself on the right path, give me a call. Not only can I help you get in touch with people who you can trust to find out what your options are, but I can use my experience
in my own business of designing and building to help you make a solid investment in real estate and in your future.

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