How Self-Employed Buyers Can Get Pre-Approved for a Mortgage in Canada
Can you get a mortgage if you’re self-employed in Canada?
Yes, self-employed Canadians can qualify for a mortgage, but the process is different from that of salaried applicants. Since you don’t have traditional pay stubs or T4s, lenders will verify your income and financial stability using additional documentation to build a stronger file.
Self-employment income is generally seen as more variable than salaried income, so lenders place a stronger emphasis on financial history to ensure you can afford your mortgage payments over time. For example, lenders typically prefer two years of self-employed income to process your pre-approval, but additional financial history from previous jobs, an excellent credit score, and a solid down payment can help push your pre-approval forward even if you’ve been self-employed for less than two years.
Why mortgage pre-approval is important for self-employed buyers
A mortgage pre-approval is a crucial step for self-employed home buyers. Before you start house hunting, pre-approval shows you:
How much a lender is willing to let you borrow based on your specific profile
Your potential interest rate
Your pre-approval shows you how much you can realistically spend on a house based on how lenders assess your financial background. It also locks in your qualifying rate for up to 120 days, meaning you’ll have rate security while you search for the right property.
How lenders assess self-employed income
Self-employed buyers must prove their income and demonstrate stability and consistency to get pre-approved for a mortgage. Unlike salaried employees, self-employed borrowers don’t provide T4 slips or pay stubs, so lenders request alternate documentation to confirm income.
Here’s how lenders typically assess your self-employed income:
Two years of Notices of Assessment (NOAs): These summaries from the Canada Revenue Agency (CRA) show your actual assessed income after deductions.
T1 General tax returns: Your personal tax returns illustrate taxable income and business profitability.
Business financials: Depending on the business structure, lenders may require accountant-prepared financial statements for incorporated businesses.
Bank statements: Both business and personal statements over several months help demonstrate regular income deposits and cash flow.
Keep in mind: Most lenders like to see at least two years of income history as evidence of stability, but some alternative lenders may consider flexibility based on additional documentation.
Documents needed for a self-employed mortgage pre-approval
Every lender has slightly different requirements for self-employed mortgage pre-approvals. Regardless, having your documentation organized upfront increases your chances of a smooth pre-approval.
Here’s an overview of the documents required for a mortgage pre-approval if you’re self-employed:
Identification: Two pieces of government-issued ID for each applicant (e.g., driver’s license, passport, PR card).
Credit report: A recent full report from Equifax or TransUnion.
Bank statements: Six months of business bank statements showing regular business activity.
Business license or incorporation documents: Proof of registration or incorporation.
T2 corporate returns: Two years of T2 corporate returns if your business is incorporated.
You will also need to provide the following supporting documents for your proof of down payment:
90 days of bank statements: For the account(s) your down payment will come from.
Gifted funds (if applicable): Signed gift letter, proof of the donor’s ability to gift the funds (bank statement).
Sale of assets (if applicable): Proof of sale, deposit trail showing funds entering your account.
Large or irregular deposits: Written explanation + supporting documentation where available.
If you currently own a property, you will be required to provide:
Mortgage statement: Most recent statement for your existing property.
Property tax bill: Latest annual statement or proof of payment.
Lastly, these documents may be required depending on your personal or financial situation:
Separation agreement and child support documentation
Bankruptcy or consumer proposal discharge documents
Rental income documents (if rental income is being used): Lease agreement or proof of deposit history (if available).
Mortgage pre-approval scenarios for self-employed buyers
Buying a home while self-employed isn’t a one-size-fits-all situation. Your strategy may vary based on whether:
You’re buying alone and self-employed
You’re buying with someone else and one party is self-employed and the other is employed
You’re buying with someone else and both parties are self-employed
Let’s review the logistics behind each scenario.
Buying a home when you’re self-employed and buying alone
If you are the only income source, lenders will focus on personal and business documentation. You’ll need a consistent income track record and strong financial records to support your file, and a larger down payment or reduced debts can significantly help improve your approval odds.
This scenario typically requires the most thorough documentation since your entire qualification is tied to your sole business income.
Buying with a partner where one is self-employed and one is salaried
If you are co-signing with an individual who is salaried or works a full-time job with hourly pay, lenders will combine both income types for a strong overall application.
Salaried income adds stability, which can offset minor variability in your business income. Plus, your combined ratios (GDS/TDS) and stress test outcomes will likely improve with the contribution of both incomes.
This scenario generally results in higher borrowing power because lenders consider both sides of income stability.
Buying when both you and your partner are self-employed
If both buyer parties are self-employed, lenders will evaluate each income separately and then combine them. This means you’ll likely need strong, consistent tax returns for both applicants.
In this case, keeping personal and business finances clean and well-documented is essential. Planning and paperwork organization early will make the approval process much faster and smoother.
The mortgage stress text and debt ratios
In Canada, you are required to pass a mortgage stress test to show you can afford payments if interest rates rise. This test is mandated across all federally regulated lenders, so it’s best to stay prepared for it.
To pass, you must:
Qualify at a rate higher than your contract rate: Either the qualifying rate of 5.25%, or your rate plus 2%, whichever is greater.
Lenders also consider debt coverage through the following ratios:
Gross Debt Services (GDS): Total housing costs should not exceed approximately 39% of your income.
Total Debt Services (TDS): All debts combined should not exceed approximately 44% of your income.
Common challenges for self-employed buyers
Self-employed buyers may face a different set of hurdles than salaried borrowers, and it’s not because you’re less qualified. It’s typically because lenders assess your income and risk differently.
Some of the most common challenges include:
Lower reported income due to tax deductions: Many self-employed individuals legitimately reduce taxable income through business expenses, write-offs, and depreciation. While this is smart tax planning, it can make income appear lower on paper, which may reduce borrowing power.
Income variability from year to year: Even profitable businesses can show fluctuations. Lenders tend to favour consistent or gradually increasing income, so large swings can trigger additional scrutiny.
More documentation requirements: Lenders rely on tax returns, Notices of Assessment, and bank statements to verify self-employed income. Gathering and organizing these documents takes more time and preparation.
Stricter underwriting and stress-test impact: Self-employed borrowers are still subject to Canada’s mortgage stress test, and lower declared income can make qualifying more challenging when rates are higher.
Ways to strengthen your self-employed mortgage pre-approval
A strong pre-approval doesn’t happen by chance, especially when you’re self-employed. The good news is that there are several proactive steps you can take to improve your position before applying.
Here’s how to strengthen your file:
Improve your credit score: Strong credit helps offset perceived income risk and can improve your approval odds and interest rate options.
Reduce existing debts: Lowering credit card balances, lines of credit, or loan payments improves your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios, which are critical in mortgage qualification.
Keep business and personal finances separate: Clear separation makes it easier for lenders to verify income, track cash flow, and understand your financial structure.
Save a larger down payment: A higher down payment reduces lender risk and can increase flexibility, especially if income qualification is tight.
Avoid major financial changes before applying: Job changes, new loans, large purchases, or sudden shifts in income can raise concerns and delay approval.
Should self-employed buyers work with a mortgage agent?
For self-employed buyers, working with a knowledgeable mortgage agent is often one of the most important decisions you can make.
Self-employed mortgage applications require more than just submitting documents. They require a strategy. An experienced mortgage agent understands:
How lenders verify and interpret self-employed income
Which lenders are more flexible with business owners and entrepreneurs
How to structure your application to clearly tell your financial story
How to avoid unnecessary declines that can hurt your credit and momentum
Rather than applying blindly or relying on a single bank’s criteria, a mortgage agent helps match your unique situation to the right lending options, prepares your file properly, and guides you through the process with clarity.
For many self-employed buyers, this support can be the difference between frustration and approval, and between settling for limited options and securing a mortgage that truly fits their long-term goals.
If you have questions about your own self-employment income, want help preparing for pre-approval, or are ready to discuss your next steps, feel free to reach out to me on Instagram, send me an email, or book a call using the button below.
I’d be happy to walk you through your options and help you get mortgage-ready!
