The short answer
The starting list
- Notice of assessment from the Canada Revenue Agency, with the matching T1 General return, for each year the lender asks for (often the last two)
- Statement of business or professional activities (T2125)
- Proof the business exists: GST/QST returns, business account statements, a licence or incorporation documents, financial statements reviewed or audited by an accountant, a commercial credit report
- Your down payment proof (statements, see the article on where it comes from)
- For a corporation, the company’s financial statements and your dividend or salary income
How income is established
The lender looks at net reported income, often an average of several years, after the deductions you took. For a sole proprietorship or partnership, CMHC allows income to be increased by 15%, or eligible deductions to be added back by hand. Debt ratios then apply as for any file: 39% (gross) and 44% (total).
Under 24 months
A newer self-employed borrower can qualify with other factors: buying an established business, enough liquidity, predictable income, relevant training, credit history. The file is read piece by piece, lender by lender.
An example of how it is read
Frequently asked questions
Can I use income before deductions?
The lender starts from net reported income. The deductions you took reduce the income used, apart from the add-back set by the lender’s rule.
Do I need to be up to date on taxes?
A balance owing to the tax agency is looked at closely: settle it or document an arrangement before filing the application.
Is there a product without proof of income?
Some lenders and insurers offer stated income, with a larger down payment. It is an exception, not the rule.