If you’re self-employed in Calgary and working in unconventional fields like being an influencer or earning income through adult entertainment, you may face unique challenges when applying for a mortgage loan. Traditional lenders often look for steady, documented income, which can make it tough for self-employed individuals whose earnings fluctuate or come from non-traditional sources. But with the right preparation and strategy, securing a mortgage loan is definitely possible.
Here’s how you can improve your chances of getting a self-employed mortgage loan, even if your income isn’t traditional.
1. Organize Your Financial Documents
One of the biggest hurdles for self-employed individuals is proving their income to lenders. Unlike salaried employees who provide pay stubs, self-employed people need to show alternative documentation to verify their earnings. Here’s what you’ll need:
- Tax Returns: Lenders typically ask for at least two years of tax returns to assess the consistency and stability of your income. Ensure that your tax filings are accurate and up to date.
- Profit and Loss Statements: If you run a business or operate as a sole proprietor, prepare profit and loss (P&L) statements to show your earnings and expenses over the past couple of years.
- Bank Statements: Lenders may request personal and business bank statements to verify cash flow. Be prepared to provide at least six months’ worth of statements to show consistent income deposits.
- Business Invoices or Contracts: If you work with multiple clients or platforms (e.g., Patreon, YouTube), providing invoices or contracts can help further prove your income stream.
Tip: It’s essential to keep clear records. Lenders want to see that your income is stable, so having your financial documents well-organized and accessible will make the process smoother.
2. Improve Your Credit Score
A strong credit score is a major factor that lenders consider when evaluating your mortgage application. For self-employed individuals, a good credit score can help offset concerns about fluctuating income. To improve your credit score:
- Pay off any outstanding debts: Reducing your debt load will lower your debt-to-income ratio and show lenders that you manage your finances responsibly.
- Pay your bills on time: Consistent, on-time payments build trust with lenders and boost your credit score.
- Avoid applying for new credit: Too many credit inquiries can negatively impact your score. Try to avoid taking out new loans or credit cards in the months leading up to your mortgage application.
In Calgary’s competitive housing market, a good credit score can also improve your chances of securing a loan with better interest rates and terms.
3. Save for a Larger Down Payment
One of the best ways to improve your chances of getting a self-employed mortgage loan is to offer a larger down payment. The more equity you can put into your home upfront, the less risk the lender takes on. For many self-employed individuals, a down payment of 20% or more is often required, particularly if your income fluctuates.
A larger down payment not only reduces the lender’s risk but can also help you secure better interest rates. Start saving early, and be sure to set aside more than the minimum requirement so you’re prepared for closing costs and other fees.
4. Work with a Mortgage Broker Specializing in Self-Employed Loans
A mortgage broker can be a valuable resource when you’re self-employed and navigating the loan process. Brokers who specialize in self-employed mortgage loans understand the unique challenges of unconventional income streams and know which lenders are more likely to approve your application.
In Calgary, brokers with experience working with individuals in creative fields like influencers or adult entertainment professionals can help you gather the necessary documents, prepare your application, and find lenders who offer more flexibility for non-traditional earners.
5. Consider Low Doc or Stated Income Loans
If you’re having trouble gathering all the required documents for a traditional mortgage, you may want to look into low doc (low documentation) or stated income loans. These types of mortgages are designed for people who might not have the standard paperwork but can still show their ability to pay off the loan.
With a low doc loan, you might not need to provide the same detailed income documentation as with a full doc loan, but you may have to provide:
- Bank statements showing regular deposits
- An accountant’s letter verifying your income
- Proof of ongoing business activity, such as contracts or platform payouts
Keep in mind that these loans often come with higher interest rates or require larger down payments, so weigh the pros and cons before committing to this option.
6. Stabilize Your Income and Reduce Expenses
If your income fluctuates widely, consider stabilizing your earnings as much as possible in the year leading up to your mortgage application. Try to minimize any large gaps in income by:
- Diversifying your income streams (e.g., multiple platforms or client bases)
- Locking in long-term contracts with your clients
- Setting up automatic or recurring payments where possible
Additionally, try to reduce your business expenses to show a higher net income. The more stable your earnings appear to lenders, the better your chances of being approved.
7. Build a Solid Cash Reserve
In addition to your down payment, having a solid cash reserve is essential. Many lenders look for borrowers who have a buffer of savings in case of unexpected financial hardships, especially for self-employed individuals who may experience fluctuations in their income.
A general rule of thumb is to have three to six months’ worth of living expenses saved up. This demonstrates that even if your income dips, you’ll still be able to make your mortgage payments.
8. Work With an Accountant to Optimize Your Tax Returns
Self-employed individuals often claim deductions to reduce taxable income, but this can work against you when applying for a mortgage. Lenders look at your net income (after deductions) when evaluating your ability to repay a loan.
Consulting an accountant who understands both tax strategy and mortgage lending requirements can help you balance reducing your tax liability while still showing sufficient income on your tax returns.
Key Takeaways
If you’re self-employed in an unconventional field like influencing or adult entertainment, getting a mortgage loan in Calgary might seem complex—but it’s certainly possible with the right approach. Organizing your financial documents, improving your credit score, and working with a specialized mortgage broker can all significantly boost your chances of approval. Additionally, considering low doc loans and ensuring you have a stable cash reserve can further enhance your mortgage application.
Take the time to prepare well in advance, and you’ll be well on your way to securing your dream home in Calgary.
