Self-employed: how to qualify for a mortgage in Québec
No T4 doesn't mean no mortgage. What lenders actually look at, explained simply.
The myth: no T4, no mortgage
You're self-employed and think a mortgage isn't in the cards because you don't have a T4? That's one of the most common beliefs among entrepreneurs and freelancers, and it's wrong.
Lenders evaluate self-employed borrowers differently, not more harshly. The file is just built with different pieces than a salaried employee's, and a broker who knows the rules of several lenders at once can help you find the right door.
What lenders actually look at
Instead of pay stubs and T4s, a lender generally asks for a different kind of income proof, built over time rather than a single figure.
About 2 years of history
Most lenders ask for about 2 years of income tax returns (T1 General) and Notices of Assessment, to see the trend in your income rather than one good or bad month.
Tax documents, not pay stubs
Your tax returns and Notices of Assessment replace T4s and pay stubs. Keeping your taxes current and properly filed remains the foundation of any self-employed file.
Consistency matters more than the gross figure
A lender wants to see a stable or growing income over the period, not necessarily one impressive number in a single year.
Your real income isn't always what shows up on your taxes
Many self-employed people legitimately deduct several expenses to reduce their taxable income. That's good tax practice, but it can make your net income look lower than it really is to a lender.
This is exactly where a program like CMHC's comes in: it lets your declared net income be grossed up by 15%, or uses an 'add-back' approach that reintroduces certain eligible non-cash expenses, like depreciation, to better reflect your real ability to pay. In other words, the number that looks low after your deductible expenses isn't necessarily the final figure a bank uses.
The exact details of this gross-up depend on the lender and the program; that's precisely the kind of nuance a broker checks for you, file by file.
Options exist, even if your file isn't 'classic'
Self-employed doesn't mean limited options. Depending on your situation, several paths exist.
Down payment from 10%
Sagen's Business for Self (Alt. A) program, for example, allows insured financing up to 90% of the property value, with a minimum 10% down payment, for a self-employed borrower with a minimum of 2 years of history.
Less than 24 months in business
If you've been in business less than 24 months, not everything is automatically closed off. CMHC offers additional flexibilities depending on your cash reserves, whether you acquired an already-established business, or whether you have a good credit history combined with relevant training in your field.
Every lender reads the file a little differently
Thresholds, required documents, and how income is calculated vary from one lender and one program to another. That's why comparing several policies at once makes a real difference for a self-employed borrower.
How a broker helps
A mortgage broker doesn't work for a single bank. They compare several lenders' policies at once, and a self-employed borrower often has more to gain from shopping around than any other borrower profile.
Before you even submit an application, a broker can look at your last 2 tax returns and Notices of Assessment, spot where an income gross-up or a program like CMHC's or Sagen's could apply to your file, and tell you concretely what a lender will see, before you commit to a direction.
Anthony King, AMF-certified mortgage broker #254937
Let's talk about your file
Self-employed, an entrepreneur, or a freelancer, and wondering where you stand? Let's book a short call to look at your situation, your last 2 years of income, and the options available to you.