Self-employed borrowers represent one of the biggest opportunities for mortgage brokers, and one of the biggest challenges. These clients often get turned away by their bank, which is exactly why they need a broker.
Why Self-Employed Deals Are Complex
Self-employed borrowers face unique challenges:
- Declared income is usually lower than actual income (tax optimization)
- Income varies year to year (especially contractors)
- Most A-lenders require 2 years of T1 Generals and NOAs
- TDS/GDS ratios often fail with declared income
- Different lenders treat self-employed income differently
The Three Income Verification Approaches
1. Full Documentation (A-Lenders)
- 2 years of T1 Generals with NOAs
- Business financial statements
- Use declared (line 150) income
- Best rates, strictest qualification
- Client must have strong declared income
2. Stated Income (B-Lenders)
- "Reasonable" stated income based on occupation
- 2 years in same business required
- No T1 verification (or minimal)
- Rates 1-3% higher than A-lenders
- Lender fees: 0.5-2%
3. Bank Statement Programs
- 12-24 months of business bank statements
- Income derived from deposits
- Growing availability in Canadian market
- Middle ground between full doc and stated
The Challenge: Finding the Right Lender
Every B-lender has different criteria for self-employed borrowers:
- Minimum years in business (1-3 years depending on lender)
- Acceptable business types
- Maximum LTV (65-80% for stated income)
- GDS/TDS flexibility (some go to 50%)
- Geographic restrictions
- Minimum credit score
Manual approach: Call 3-4 B-lenders you know. Takes 2-3 hours. Miss lenders that would have offered better terms.
bips approach: Enter the scenario once, test against 40+ lenders including all B-lenders and credit unions. Find every qualifying option in 2 minutes.
Real Example
Client: Plumber, 3 years self-employed, declared income $65K (actual ~$120K), purchasing $650K semi in Brampton ON, 15% down, 680 credit.
Manual result: Broker checks 4 known B-lenders, finds 2 that accept the deal.
bips result: Tests all 40+ lenders, finds 7 qualifying lenders including 2 credit unions with better rates and lower fees than the B-lenders the broker would have checked.
Client savings: 0.75% lower rate = $4,800/year in interest savings.
Tips for Self-Employed Deals
- Always run bips first: you'll be surprised which lenders accept the deal
- Check both stated income and full doc paths: if T1 income works for any lender, the rate will be better
- Credit unions are underrated: many have flexible self-employed programs
- Down payment matters more: higher down payment opens more lenders
- 2 years minimum: very few lenders accept less than 2 years in business
The Bottom Line
Self-employed deals are where brokers earn their commission. The broker who checks more lenders finds better options. bips (bips.ca) makes it possible to check all 40+ Canadian lenders for every self-employed scenario in under 2 minutes.
Try it free: bips.ca/sign-up