Is it hard to get a home loan if you are self-employed?
 
Being self-employed has tremendous perks - from being your own boss and setting your own hours, to carving out your own destiny. It can be a huge step in your career and in your life. However, many people hesitate to take the full leap into entrepreneurship because of the concern that they will not be able to secure a mortgage or home ownership loan in the future.
 
Luckily for most Canadians (and there are over 3 million who are currently considered self-employed!), securing a mortgage can be a fairly simple process if you are organized and prepared, regardless of being a business owner or contract employee.
 
History Over Mystery
 
Your credit history is important. Having a long-standing credit score is great - it's proof that you have been a reliable lender for some time and have built a good credit reputation. It's almost impossible to get a home loan without some kind of previous credit card, car payment or loan. Having no credit history doesn’t indicate that you will be a safe lender, in fact, it’s quite the opposite really; you need to have some credit history established. Paying for everyday expenses on a credit card then completely paying it off monthly is a great way to build a strong credit score.
 
As well, ensure that any bad debts or defaults have been paid off or cleared - but be aware: this can take seven-to-ten years to clear completely off of your score. Check your score via Credit Karma or EquiFax credit report and know where you currently stand.
 
Plan Ahead
 
If You know you want to purchase a home or condo, it’s important to have all of your “ducks in a row”, so to speak, before approaching banks or brokers.
 
Have at least 3 years of completed tax return documents proving your self-employment or dividends.
 
Gather your business documentation

Notices of Assessment from the Canada Revenue Agency to confirm you have no tax liability, proof that your GST is up to date and paid in full, a copy of your business license or incorporation documents, and financial statements for your business.
 
Be aware of all your current debt such as car payments and credit card balances. Mortgage lenders will also take into consideration your debt-to-income ratio - this includes things like daycare, personal loans, alimony and child support, student loans, and health insurance premiums.
 
Down Payment
 
Recent changes to the Canadian mortgage rules have put in place stricter qualifiers, or what is called a “stress test” for all buyers (not just those who are self employed). This ensures that when interest rates rise, borrowers will still be able to afford their payments. A stress test typically calculates a mortgage interest rate approximately 2% higher than the posted bank rate.
 
Though some may be able to qualify with just a 5% down payment, banks are becoming more stringent with their offerings. Having 20% to put down is ideal and will help you qualify for a better rate as a self-employed business owner.
 
The process of purchasing a home, whether as a first time home buyer or having  purchased multiple properties, is such a sense of accomplishment. Each situation will vary depending on your individual needs and requirements but being self-employed should not hinder your ability to purchase a home.