You've built a business, generated revenue and created financial stability. Then you apply for a mortgage and hear: "your income is too low." That's frustrating when the income on your personal return doesn't fully reflect the business behind it. Being self-employed isn't automatically a disadvantage. It does require a different level of income analysis.
What the numbers actually mean
A salaried employee's income can be supported with a letter and pay statements. A business owner's picture may include salary, dividends, corporate earnings and expenses that are treated differently under different lending policies. Depending on your structure and the lender's criteria, qualifying income may include a portion of corporate net income after tax and eligible expense adjustments.
Potential adjustments can involve capital cost allowance, amortization or certain vehicle expenses. They are not automatic, and the same income or expense cannot be counted twice. The work is in understanding the statements and matching the application to the right policy.
What if you don't qualify today?
Then we identify what needs to change and set a realistic plan. As part of our complimentary pre-approval process, we can work with your accountant to explain the income documentation lenders will consider. Your accountant remains responsible for tax advice; our role is to explain how legitimate compensation decisions may affect your mortgage options. Planning before the next financial year is complete gives you more room to prepare.
When an alternative lender makes sense
Sometimes waiting for another tax year isn't practical, or the tax cost of changing your compensation outweighs a lower rate. In those cases, business-bank-statement programs or other alternatives may be worth comparing. The decision should account for interest, fees, taxes, timing and your longer-term plan.
Planning a purchase or refinance? Have CD Mortgages review your personal and business income together.