The first call
Karine is an IT consultant, incorporated for four years. She bills $180,000 a year and wants to buy a semi-detached at $520,000 with $60,000 down. Her bank told her “around $300,000” without explaining why. On the phone, I do not ask for her revenue. I ask three things: what she pays herself, what her personal returns show, and what the corporation keeps. A $70,000 salary, $20,000 in dividends, and retained earnings that vary from year to year. Three figures, three possible readings across lenders.
What the returns showed
Before pricing anything, Karine pulls her last two personal returns, her notices of assessment, and the corporation’s financial statements. Year 1 shows $86,000 of personal income; year 2, $104,000. A $4,200 tax balance sits on the latest notice. The statements show a $38,000 profit last year, but also an equipment purchase and a part-time hire.
| Record | What it says | What the lender does with it |
|---|---|---|
| Personal returns | The income she chose to pay herself | The basis of the “reported income” method |
| Notices of assessment | The income assessed by the CRA and the balance owed | The proof almost every lender requires |
| Financial statements | The corporation’s profit and cash | The basis of a “business income” method at some lenders |
The tax balance is disclosed right away, with proof of the payment arrangement. Information that surfaces at the end of the review slows everything; announced at the start, it is just one line in the file.
The bridge between the history and the current year
The current year is stronger: the new hire is paying off, the order book is full. Karine would like the lender to count $130,000. I prepare two calculations. The first rests on the two completed tax years, an average of about $95,000, with the gross-up some programs allow on business income. The second shows the current year, with signed contracts and the corporation’s interim results. The lender will decide which one it can use; Karine, for her part, knows now that her purchase should not rest entirely on income nobody has confirmed yet.
The purchase budget she kept
With $95,000 of counted income, a $420 car payment, and the tax balance under arrangement, capacity at the qualifying rate lands around a $400,000 loan, so a $460,000 price with her down payment. The $520,000 semi does not pass on the prudent basis. On the current-year basis it would, barely, with no reserve. Karine chooses to aim for $470,000 and keep $12,000 aside after closing, plus a separate reserve inside the corporation for its taxes and payroll. A larger down payment pulled from the corporation would have qualified her for the semi, but the business would have had to borrow the following month to operate.
What the accountant changed
Her accountant proposed moving to dividends only, starting next year, for sound tax reasons. Before deciding, we look together at how each lender would read that change: some count dividends like salary, others weight them, a few ignore them in the first year. The accountant keeps the strategy but shifts it six months, after closing. I do not replace their advice; I only want us on the same timeline, without a good business decision making a figure look lower at the wrong moment.
The offer, the review, and the approval
Karine finds a house at $465,000. The offer allows ten business days for financing. The file goes to two lenders whose method counts business income, not to all of them. The first accepts $95,000 of income and asks for a written explanation of the gap between the two years; it is already prepared. The second asks for the tax balance to be settled before funding. Approval on day six, with one condition: the current year’s notice of assessment as soon as it arrives.
What this file shows
Revenue played no part in the review; the income paid out and the notices of assessment decided everything. The tax balance disclosed up front did not block anything. The target price came from the counted income, not from the bank’s maximum. And the accountant kept the strategy. This example sets no eligible income and no approval: it shows the order in which we work.
What I review in a self-employed file
Frequently asked questions
Can one strong year be enough?
It depends on the lender. Time in business, continuity, the program, and the records you have on hand determine what can be considered.
Can every deducted expense be added back to income?
Only some. It depends on the nature of the expense and the lender’s method; a tax deduction is not automatically an eligible add-back.
Must a tax balance be paid before applying?
It has to be disclosed and documented at minimum. Treatment depends on the amount, the payment arrangement, and the lender’s criteria.
Sources and review
CMHC — Mortgage loan insurance for self-employed borrowers, CRA — Notices of assessment, and FCAC — Preparing to get a mortgage. Reviewed August 16, 2026.