Stated Income Mortgage

by Darrin DeRoches December 26, 2013 - January 1, 2014

If you are self–employed and looking to buy a home in the new year and are wondering how to make it happen – think ahead.  A lot of people nowadays do not have a tax return that states a high income.  Most self–employed people look to show as little income as possible so that they pay very little tax. This becomes a problem when they want to lease a car or buy a property but things are slowly changing.  In the past, you would have to go to “private lenders” who would charge you a high interest and high signing fees to get any type of mortgage.  Today you can get with a bank and negotiate the same mortgage with less fees and lower rates.     I was speaking with CIBC mortgage manager and asked him how one of my clients can prepare himself to buy a property when he has a very low stated income.  There are several ways to accomplish this but the best may be to be incorporated.  If you start a company and have it for over six months, you can then justify to a bank that you are a legitimate business and use their stated income program.  Let’s say you are a plumber who works for a builder and they pay you cash. It would be very hard to prove your income even though you make a good living.  If you started a company that does plumbing or even plumbing consulting and you took that cash and deposited in the company account for three months to show income, you could then prove to a bank that it is a “legitimate company” and state your income. The bank knows your history as a plumber and now sees three months of a company making money; they now take this information and accept how much income you make even though you may show the tax man a different scenario.     In their stated income program you need to show income statements for three months, a license for your business and a business card verifying what you do for this company. This with a 10 per cent downpayment then they can the approve you for an appropriate mortgage.  If you have a license to do anything from a plumber, bartender to a stripper you can create a company and prove your income. The banks realize that you work in a cash business but are able to sufficiently pay a mortgage but you just need to have the right paperwork in order.  So if you are looking to buy a property in the new year, take time to set things in the right direction and in a short period of time you can arrange a mortgage and own your own home. The rates are a bit higher and it will take time and money but it will be worth it. If you need to establish credit it also can happen in the same time period and you just need to make a plan.  Give us a call and we can help you own your home in 2014. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at sold@uniquerealty.ca