Real Estate

First time home buyer as a SP

  • Last Updated:
  • Jun 30th, 2022 10:59 pm
[OP]
Newbie
Aug 27, 2021
71 posts
66 upvotes

First time home buyer as a SP

Hello guys, quick question.
I am a sole proprietor and plan to buy my first home.
My business income almost tripled for this year (projected)
Compared to 2021
Reason is that I also had employment income in 2021

Will the banks consider the increase or just calculate the average of 2021 and 2022?

I was always a bookkeeper, SP and also salaried in the past 15 years. Same field since forever
Will 5% down be enough to qualify?
I am not sure if a SP generally need 20% down

I live in a small town in Alberta and look at a home price between 200 and 240K so nothing huge and expensive
7 replies
Deal Fanatic
User avatar
Oct 16, 2008
9589 posts
3884 upvotes
Vaughan
Best to find and work with RE mortgage broker.
I hate to speculate. I hate to forecast. I am just proactive.
Member
Nov 5, 2009
259 posts
175 upvotes
They'll look at your last 2 noa's at a minimum. Your tripling of income will probably have them look further back.

I just bought an acreage in Central alberta. The one lender I was with wanted 40% down to use them even though I had used them for the last 10 years on the place I was moving from.
[OP]
Newbie
Aug 27, 2021
71 posts
66 upvotes
gwill211 wrote: They'll look at your last 2 noa's at a minimum. Your tripling of income will probably have them look further back.

I just bought an acreage in Central alberta. The one lender I was with wanted 40% down to use them even though I had used them for the last 10 years on the place I was moving from.
I talked to my broker and she said 5% is enough because i am looking at a small place around 200K
[OP]
Newbie
Aug 27, 2021
71 posts
66 upvotes
gwill211 wrote: They'll look at your last 2 noa's at a minimum. Your tripling of income will probably have them look further back.

I just bought an acreage in Central alberta. The one lender I was with wanted 40% down to use them even though I had used them for the last 10 years on the place I was moving from.
this year is my first year 100% only self employed income. before I always had mainly employment income.

but always the same type of work
Deal Addict
User avatar
Sep 4, 2005
3250 posts
1107 upvotes
Toronto
For sole property they usually look at two years income and 2 NOA's like mentioned above. The tripling of income won't be a big issue but they will question if it's sustainable or a blip.
Newbie
Jun 28, 2012
70 posts
49 upvotes
Ontario
Down payment doesn't vary for self-employed or otherwise. 5% down is fine as long as you qualify for the mortgage required. As for income, banks will always go off an average of the past 2 years based on NET business income shown on your T1 Generals (not gross income) backed up by your Notice of Assessments. Taxes must be current. Some banks allow the average to be increased by 15% as long as income has been increasing year to year, some lenders allow certain business deductions to be added back. Non-prime lenders will look at gross income over the past 6-12 months, but rates are higher, fees are involved and 20% down is required to go that route.
[OP]
Newbie
Aug 27, 2021
71 posts
66 upvotes
wamartin wrote: Down payment doesn't vary for self-employed or otherwise. 5% down is fine as long as you qualify for the mortgage required. As for income, banks will always go off an average of the past 2 years based on NET business income shown on your T1 Generals (not gross income) backed up by your Notice of Assessments. Taxes must be current. Some banks allow the average to be increased by 15% as long as income has been increasing year to year, some lenders allow certain business deductions to be added back. Non-prime lenders will look at gross income over the past 6-12 months, but rates are higher, fees are involved and 20% down is required to go that route.
thanks. my broker told me in my case they can use my gross income. I am a bookkeeper and work from home and the only expenses I have are some office supplies and my home office.
I might wait until I have saved up 20%

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