You Claimed Less on Purpose. There Are Still Two Doors In.
Your accountant did exactly what you asked. Every receipt went in, every write-off was claimed, and your tax bill came down. Then your Notice of Assessment arrives, and the income on it looks nothing like the year you actually had.
That was a choice, and for a lot of self-employed people it is the right one. The question is what it does to a mortgage application. The answer surprises people in both directions.
Door one: the prime side
Many prime lenders average the income on your tax returns over two years. Some will also gross that figure up by about 15 percent, approximate, to recognize the expenses you wrote off. If your claimed income is anywhere close to what you need, that gross-up can be enough to fit the standard debt ratios, and you borrow at regular prime rates.
Door two: the alternative side
If the gap between what you earned and what you claimed is bigger, alternative lenders work with extended ratios, which means they let your housing costs take a larger share of your claimed income. The trade is more skin in the game: you need 20 percent down. And right now, some alternative rates are as good as, or better than, prime rates. Less tax paid over the years, more cash down today, same house at the end of it.
Which door is yours
Claimed income close to the real thing? Door one is likely yours. Heavy write-offs and cash saved instead? Door two was built for exactly that. Claiming less did not shut you out of owning a home. It just changed which door you walk through, and how much cash walks in with you.
My Self-Employed Check asks a few plain questions about your business, your documents, and your down payment, and tells you which lending route fits you, the prime door or the alternative door, and how your file stacks up.
No pressure, and no obligation. Just a clearer picture, and help beside you the whole way.
Always in kindness, Tonia | The Mortgage Missus Inc.
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