29 Jul

NEW RULE CHANGES FOR THE SELF-EMPLOYED

First-Time Buyers

Posted by: Cody Rowe

As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.
In an announcement on July 19, 2018, Romy Bowers, CCO of CMHC made the following statement:

“Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation.

These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

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Written by:

KRISTIN WOOLARD
Dominion Lending Centres – Accredited Mortgage Professional
6 Mar

How to Turn Your Tips Into Real Estate Gold

First-Time Buyers

Posted by: Cody Rowe

Times have changed in Canada.

Serving and bartending are now sought-after positions that can allow the right person to create a career in the restaurant industry with pay similar, if not better than bank advisors, bookkeepers or construction workers

There is one question a lot of servers and bartenders have on their minds….

Is it possible to turn your cash tips, into real estate gold?

This can be difficult for one reason…

Because your tips may fluctuate you are treated like you are self-employed.

Don’t fret though!

That’s why we created this list of “must-do’s” for servers, and bartenders to use when planning for that property purchase….

Tip #1 – Start Claiming Your Tips!

Let’s be honest here.

A LOT of you will not claim your tips as part of your income when tax season comes.

If you want to qualify to buy a home, you need to have PROVEN income to be approved for a mortgage.

The more you make on paper, the more you qualify for.

Now how do you remember what you made each month?

Here’s a simple strategy to stay organized….

  • Buy an agenda, a calendar or download a calendar app
  • Write down what you make in gratuities every shift along with your hours
  • Add up your total tips for each month and write the total at the bottom of each month

Tip #2 – Only Make 2 Deposits a Month

Do you make a lot of small deposits at your bank? Stop that!

Here’s why…

Lenders will confirm your income is by having looking at bank statements to confirm deposits of a steady paycheck.

If you have 10 – 20 deposits a month, this is a nightmare for banks to confirm and appears inconsistent in their eyes.

Here’s a good rule of thumb:

Deposit your tips ONLY when you deposit your paycheck.

Tip #3 – Find Out Your Average Net Gratuity Per Shift.

We want to make your income appear as consistent as possible.

We can do that by calculating your Average Net Gratuity Per Shift and explaining that in your Job Letter.

[Note: If you want to see what that looks like, feel free to download and use our FREE Job Letter for Servers & Bartenders]

 

Job Letter for Servers & Bartenders

Use This Free Template to For Your Next Mortgage Approval

Click here to get started

 

Speak to your General Manager, and request to have this included in your Job Letter.

Tip #4 – Talk with Your Mortgage Broker BEFORE You’re Ready to Buy

A strong relationship with your Dominion Lending Mortgage Advisor can be one of your most valuable partnerships in real estate.

Set up this relationship early in the process before you start house shopping so you can get started on things like…

  • Fixing blemishes on your credit bureau
  • Establishing better credit history and boosting your score
  • Finding out what you’re pre-approved for.
  • Grants and programs you may be eligible for.
  • Saving for a down payment.

We hope these tips have helped pave a road for you.

Know a server or bartender? They need to know this so make sure to tag them when you share this.

Need a Mortgage Approval? We Make it as Easy as 1,2,3!

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