How to Qualify for a Mortgage When You’re Self-Employed

Being self-employed comes with a lot of perks—flexibility, control over your income, and the ability to build something for yourself. But when it comes to applying for a mortgage, it can feel like the deck is stacked against you.

Unlike salaried employees who can just hand over their T4s and pay stubs, self-employed borrowers have to jump through extra hoops to prove their income. Lenders want to see stability, predictability, and profitability—which isn’t always easy when your income fluctuates.

But here’s the good news: With the right strategy, you can still qualify for a mortgage at competitive rates.

In this guide, we’ll cover:

• Alternative income verification strategies
• Which lenders are best for self-employed borrowers?
• How to structure your income to maximize mortgage approval

By the end, you’ll know exactly what steps to take to get approved for a mortgage—without having to overpay in interest.

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Why Self-Employed Borrowers Struggle to Qualify

Lenders like certainty. If you’re self-employed, they see you as a higher risk than someone with a steady salary.

Here’s why:

• Your income fluctuates – Unlike employees with consistent paychecks, self-employed income can vary from month to month.
• Tax deductions lower your taxable income – You might be earning great money, but after business expenses, your reported income looks much smaller than it really is.
• Traditional lenders rely on taxable income – Banks usually assess your mortgage eligibility based on your net taxable income, NOT your actual earnings.

If you’ve ever looked at your tax return and thought, “That’s not an accurate reflection of what I actually make,” you’re not alone.

This is why self-employed borrowers need to get creative in proving their true income.

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Alternative Income Verification Strategies

Traditional lenders (banks) typically want to see two years of personal tax returns (T1s) and Notices of Assessment (NOAs). But if your taxable income isn’t high enough to qualify for the mortgage you need, here are some alternative strategies.

1. Use Add-Backs to Increase Your Income

Lenders know that self-employed individuals write off business expenses to lower their taxable income. Some of these expenses can actually be “added back” to increase your qualifying income.

Common add-backs include:
✔️ Business use of home expenses
✔️ Depreciation (capital cost allowance)
✔️ Non-recurring expenses
✔️ Large one-time purchases

Example: How Add-Backs Help You Qualify

Let’s say your business brought in $150,000 in revenue, but after tax deductions, your taxable income shows as $60,000.

If you had $20,000 in add-backs, your lender may use $80,000 as your qualifying income instead of $60,000—giving you a better chance at mortgage approval.

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2. Grossing Up Your Income

If you're incorporated and pay yourself dividends or a mix of salary and dividends, some lenders allow you to gross up your income—meaning they’ll add a percentage back to reflect pre-tax earnings.

For example:

• If you earned $80,000 in dividends, a lender may gross it up by 15-25%, meaning your qualifying income could be as high as $100,000.

This can be a game-changer for mortgage approval, especially if your taxable income alone isn't enough to qualify.

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3. Use Business Financial Statements Instead of Tax Returns

If your personal taxable income is low due to write-offs, but your business is profitable, some lenders will accept your business financials instead of tax returns.

✔️ Many lenders will use your gross business income or net business income before tax deductions to calculate your ability to pay the mortgage.
✔️ Financial statements prepared by a CPA can make a huge difference in proving your true income.

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4. Stated Income Mortgages for Self-Employed Borrowers

Some lenders offer “stated income” mortgages, meaning you declare your income based on what you reasonably earn instead of just showing tax returns.

✔️ These programs are great for business owners who take advantage of tax write-offs but can demonstrate stable income through bank deposits and financial statements.
✔️ Lenders will often require a larger down payment (10-35%) or higher interest rates for this flexibility.

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Which Lenders Are Best for Self-Employed Borrowers?

Not all lenders assess self-employed income the same way. Depending on your financial situation, you may need to explore alternative or B-lenders to get the best approval.

A-Lenders (Big Banks & Credit Unions)

✔️ Offer the best rates, but require full documentation (T1s, NOAs, business financials, etc.)
✔️ Typically require at least two years of self-employed history
✔️ Prefer a strong taxable income (not just gross revenue)

✔️ Best for:

• Established business owners with consistent income
• Those who report enough taxable income to qualify

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B-Lenders (Alternative Lenders)

✔️ More flexible with income verification—accept bank statements, financials, and stated income
✔️ Accept applicants with shorter self-employment history (1 year instead of 2)
✔️ Often require higher down payments (10-20%)

✔️ Best for:

• Business owners with low taxable income but strong cash flow
• Those who recently became self-employed but have a strong history in their industry

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Private Lenders

✔️ Focus only on the property and your ability to make payments—not on your income
✔️ Do not require tax returns
✔️ Short-term solution with higher interest rates

 Best for:

• New business owners with no established income history
• Borrowers with credit challenges
• People who need short-term financing while they build up income proof

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How to Structure Your Income for Mortgage Approval

If you’re planning to buy a home in the next 1-2 years, you can start structuring your income now to maximize approval chances.

✔️ Work with a CPA to balance tax savings vs. mortgage eligibility

• Paying zero taxes might seem great, but it can hurt your chances of getting a mortgage.

✔️ Increase your declared taxable income for 2 years

• If you know you’ll need a mortgage, consider reducing deductions to show higher taxable income.

✔️ Keep clean business financials

• Separate personal and business expenses—messy financials can make lenders hesitant to approve you.

✔️ Reduce personal debt

• Your debt-to-income ratio matters just as much as your income—pay down credit cards and loans before applying.

✔️ Prepare for a larger down payment

• Many lenders require at least 10-20% down for self-employed borrowers.

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Final Thoughts: Yes, You Can Get Approved as a Self-Employed Borrower

Being self-employed makes mortgage approval a little trickier, but not impossible. With the right approach, you can:

✔️ Use alternative income verification strategies like add-backs, gross-ups, and business financials
✔️ Choose the right lender—big banks for the best rates, alternative lenders for flexibility
✔️ Structure your income in advance to maximize mortgage approval

If you’re self-employed and thinking about buying a home, start planning now—your future self (and your mortgage approval) will thank you.

Need help getting approved as a self-employed borrower? Let’s talk strategy!