How to get a mortgage if you’re self-employed in Canada

Self-employment gives you freedom, flexibility, and control… until you apply for a mortgage. Then suddenly, your income needs explaining, your paperwork multiplies, and the process feels anything but simple. And this issue affects a growing number of people. In 2023, 2.65 million Canadians were self-employed, representing 13.2% of the workforce. Yet this entire group faces a tougher path to approval simply because their income doesn’t show up neatly on a T4.

The good news is,  it’s absolutely possible to get a home mortgage as a self-employed worker when you understand what lenders look for and what options are available. This guide breaks it all down, so you can put together a strong application.

How lenders assess a self-employed borrower

Because income can fluctuate, borrowers with self-employed home loans need to give a more detailed review of their financial history. Instead of relying on standard employment documents, lenders will look at several factors to understand how stable and sustainable your income is.

• Income stability: Lenders want to see that your income is consistent and sustainable. Most will ask for two or more years of income history and use the average of those years to calculate the income you qualify with. If one year’s income is significantly lower, the lender may use the lower figure. Showing steady or growing earnings is a strong indicator that you can manage long-term mortgage payments.
• The health of your business: Your business financials matter just as much as your income. Lenders review how long you have operated the business, the nature of your work, your client base, and overall profitability. A business that shows consistent revenue and clear record-keeping signals lower risk.
• Personal and business credit history: Strong credit is especially important for self-employed borrowers. Since your income can be inconsistent, lenders rely on your credit score to understand how you manage debt. They may pull both your personal and business credit reports. A higher credit score, low credit utilization, and a track record of on-time payments improve your chances of approval and can help you qualify for some of the best mortgage rates.
• Outstanding taxes: Lenders check that your taxes are fully up to date. If you have unpaid personal income tax or any outstanding HST or GST balances, this can raise concerns about cash flow and financial management. Most lenders require proof that you have no tax arrears before they will approve a mortgage. 
• Source of your down payment: Lenders verify exactly where your down payment is coming from. Funds must be clearly documented through bank statements or investment account statements that show the money has been saved over time. In many cases, gift funds are not accepted for stated income applications, and at least part of the down payment must come from your own resources. 

Documentation required to qualify as self-employed for a mortgage

Apart from general documents like government-issued identification, self-employed borrowers must provide a more detailed set of records so lenders can confirm overall financial health. Requirements can vary slightly by lender, but most will ask for the following.

• Notices of assessment (2–3 years): Lenders use your NOAs to verify income, check for any outstanding tax balances, and confirm that your filings match what you report in your application.
• T1 General: Your T1 package shows your true income after expenses. It helps lenders understand how much you actually earned and whether any unusual deductions or one-time losses affected your taxable income.
• Financial statements: If you operate an incorporated business, lenders may ask for accountant-prepared financial statements. These outline revenue, expenses, profit, and cash flow, giving lenders a clearer view of your business's health.
• Recent bank statements: Most lenders ask for three months of both personal and business bank statements. These statements show consistent deposits, active business activity, and stable cash flow. They also help verify the source of your down payment and confirm that the business is generating regular income.
• Proof of collected and paid HST/GST: In Canada if your total taxable business revenues exceed $30,000, you must collect HST and GST and complete a return.  Lenders want to see that your tax obligations are up to date. A balance owing to the CRA can signal cash flow issues. Showing that your HST or GST is paid demonstrates strong financial management.
• Articles of incorporation or business licence: These documents confirm that your business is legally registered and active. Whether you are incorporated or a sole proprietor, lenders want to verify that the business exists.
• Client contracts or invoices: Lenders often ask for proof of ongoing work, especially when income varies by project. Contracts, retainers, or recent invoices help demonstrate that your earnings are stable and expected to continue.

How your business structure affects your qualifying income

Your business structure directly affects how lenders calculate your income for a self-employed mortgage application.

• Sole proprietors: Lenders look at your net income after business expenses. This means that if you write off a large number of expenses to reduce your taxes, your taxable income may appear much lower than what your business actually earns. A lower net income reduces the mortgage amount you qualify for, even if your business cash flow is stronger in reality.
• Incorporated business owners: If you operate through a corporation, lenders mostly consider the salary or dividends you pay yourself. In some cases, they also review your company’s financial statements. These statements help lenders assess the stability of your income, but they do not increase the income amount used to calculate how much you qualify for.

The way you structure your business affects how much income appears on your tax return, and your tax return is the primary document lenders rely on. Reducing taxable income can help you save on taxes, but it also lowers the amount you can qualify for when applying for a mortgage.

How lenders calculate self-employed income

For self-employed borrowers, lenders do not rely on a single year of income. Most use the two-year average method, which gives them a clearer picture of how your earnings change over time. They take the income from your last two tax returns, add the amounts together, and divide by two.

For example, you earn $72,000 in one year while rebuilding your client base, then $128,000 the following year as your business grows. Your qualifying income would be the average, which is $100,000.

If your income fluctuates, lenders may review more than two years of tax returns to understand the overall trend. However, most still calculate your qualifying income using the two-year average. If your most recent year is lower, lenders may rely on that lower figure when assessing how much you qualify for.

Some lenders might be willing to adjust your income by adding back certain expenses that reduce your taxable income. These are costs that lower your income on paper but do not actually reduce the cash your business brings in. Examples include vehicle expenses, home office costs, and depreciation. By adding these back, the lender gets a better sense of your true earning power. Not all lenders offer add-backs, and the amount they allow varies.

What happens if your income cannot be fully verified

But not all self-employed borrowers can qualify using tax returns alone. If you cannot provide a full set of tax returns and financial statements to verify your income, some lenders may allow a stated-income mortgage. Stated-income programs can make self employed home loans more accessible for borrowers whose real earning power is higher than what appears on their tax return due to legitimate business expenses and write-offs, but may come with a higher interest rate to account for the risk posed to the lender by unverifiable income.

With a stated-income application, you “state” what you realistically earn based on the nature of your business. Lenders still require proof that your business is active and financially stable, even if your taxable income appears lower on paper. Lenders typically look for:

• A minimum 10 percent down payment
• Strong personal credit
• Evidence of ongoing business activity such as invoices, contracts, or business bank statements
• Proof that all personal and business taxes are fully paid
• The income you state must be reasonable for your industry and supported by your financial records

Note: Only Sagen and Canada Guaranty provide mortgage insurance for stated-income applications. CMHC requires full income verification. 

Mortgage default insurance rates for self-employed mortgages without proof of income

If you cannot provide sufficient proof of income, you must put down at least 10%, and you will have to find a lender who uses Genworth or Canada Guaranty. Only those two providers³ offer mortgage default insurance for stated income files, at the following rates:

How to get a mortgage pre-approval when you're self-employed

Getting pre-approved is still possible when you’re self-employed, but lenders look more closely at your tax history, credit profile, and recent business activity to estimate the mortgage amount you qualify for. They are not verifying every line of your income yet – instead, they are checking whether your income appears consistent enough to support a realistic pre-approval amount.

This stage gives you an estimated price range, a rough calculation of your qualifying income, and a rate hold (from an A lender) if you’re eligible. But it does not guarantee final approval, especially if your income fluctuates or your documentation is complex.

When pre-approval may not be available

Some self-employed borrowers may not qualify for a traditional pre-approval because their application requires manual underwriting, meaning a lender cannot assess it until a live property offer is submitted. This happens when:

• Your taxable income is too low and you rely on stated income
• You have less than two full years of self-employment
• Your income fluctuates significantly year-to-year
• You expect to work with a B-lender or alternative lender
• You need insurer flexibility (Sagen or Canada Guaranty)

For instance, if you’ve been self-employed for less than two years, it is more challenging to get a formal pre-approval from a lender, but a broker can still estimate your price range based on your current income and business activity.

Mortgage lender options for self-employed buyers

The best lenders for self employed borrowers depend on your income consistency, documentation, and credit profile. You can qualify with many of the same lenders as salaried workers. The biggest difference is how each lender evaluates income and the documentation they require. 

1. Traditional lenders (A lenders)

A lenders include major banks and well-established mortgage lenders. They offer the lowest rates and the most competitive mortgage features, but they also have the strictest income verification rules. A lenders usually require:

• Two or more years of consistent self-employed income
• Clean credit
• Full documentation (NOAs, tax returns, bank statements, business records)
• Stable or growing income

A lenders work best if you have strong financials and can fully document your earnings.

2. Credit unions

Credit unions can be a good fit for self-employed borrowers who have strong finances but cannot meet the documentation requirements of big banks. They are not federally regulated, which gives them more flexibility around:

• Income verification
• Debt ratios
• Lending rules for self-employed borrowers
  
  Many credit unions consider “reasonability of income,” meaning they look at your business activity, history, and financial statements, even if your taxable income is lower. Rates may be slightly higher than A lenders, but approval can be easier.

3. Alternative lenders

B-lenders, trust companies, and private lenders serve borrowers who cannot qualify through traditional lenders. They are more flexible with income documentation and are comfortable working with:

• Irregular income
• Shorter self-employment history
• Lower credit scores
• Higher debt ratios

The trade-off is higher rates and possible lender fees. For many self-employed applicants, this option provides a pathway to homeownership while they build stronger financial documentation for future refinancing.

How to improve mortgage approval chances with irregular income

If you’re wondering how to get a home loan if self employed, the key is being prepared with complete tax history, strong credit, and organized financial records. If your income varies from month to month or season to season, lenders will look for signs that your earning pattern is stable and supported by strong financial habits.

• Show consistent business activity: Even with fluctuating income, lenders want to see that your business is active and generating steady work. Keep clear records of invoices, retainers, ongoing contracts, and recurring clients. A reliable flow of deposits in your business account helps demonstrate long-term stability.
• Separate personal and business finances: Keep business and personal banking completely separate. This makes it easier for lenders to trace income, confirm cash flow, and assess your financial picture without confusion.
• Avoid showing overly aggressive write-offs: Reporting a loss or drastically reducing your taxable income can lower the amount you qualify for. In the year or two before applying, consider balancing tax efficiency with the impact on your mortgage application.
• Build a financial cushion: Lenders are more comfortable approving self-employed mortgages when borrowers can show a buffer. Having savings equal to a few months of expenses — or healthy business reserves — helps reassure lenders that you can manage slower periods.
• Build and maintain strong credit: With irregular income, your credit score carries extra weight. Aim for on-time payments, low credit utilization, and avoid taking on new debt before applying. A strong score expands your lending options and can help offset income variability.
• Pay down short-term or high-interest debt: High balances on credit cards and lines of credit harm your debt-service ratios. Paying down revolving debt strengthens your application and can increase the amount you qualify for.
• Increase your down payment: A larger down payment reduces lender risk and can make approval easier, especially if your income fluctuates. It can also open the door to better lender options and, at 20 percent or more, help you avoid mortgage insurance.
• Consider adding a co-signer or using spousal income: If your income alone isn’t enough to support the mortgage you need, adding a co-signer or applying with a salaried spouse can significantly boost qualifying income and improve approval chances.
• Work with a mortgage broker: Brokers understand which lenders are more flexible with fluctuating income and non-traditional documentation. They can match you with lenders who evaluate your business holistically rather than focusing narrowly on one lower-income year.

Also read:

• 7 tips to get approved for a mortgage
• The do's and don'ts of mortgage pre-approval
• Top factors impacting affordability for first-time home buyers
• Mortgages and inflation: How do they affect each other?
• The Bank of Mom and Dad and Your Down Payment