Canada Mortgage and Housing Corporation (CMHC) has instituted new changes aimed at making it easier for self-employed people to get a mortgage.
CMHC said self-employed people make up about 15% of Canada's population, but they may have difficulty qualifying for a mortgage because their incomes may vary or be less predictable.
Changes unveiled late last week by the federal mortgage insurance agency are aimed at giving lenders more guidance and flexibility when it comes to self-employed borrowers.
In the changes, CMHC said several factors could be used in future to support a lender's decision to give a mortgage to self-employed borrowers who have been operating their business for less than two years or have been in the same line of work for less than two years. Those factors could include acquisition of an established business; sufficient cash reserves; predictable earnings; previous training and education.
Additionally, the housing agency laid out a broader range of document options that could be used to satisfy income and employment requirements to qualify self-employed borrowers for a loan. When the changes take effect on October 1, those documents will include such things as a notice of assessment accompanied by a T1 General tax form, a proof of income statement from the Canada Revenue Agency, and a form T2125, which is a statement of business or professional activities.
