Stated income program for insured mortgages
When your tax returns understate what the business earns, some insured programs let you state your income, within limits.
- Entry
- No. 004
- Written by
- Gaurav SophatMortgage Agent Level 2
- Published
- 2 min read
Self-employed owners often report lower income than their business actually supports. Legitimate expenses and write-offs reduce taxable income. That's sound tax planning, and it's also why a lender reading only line 15000 of your T11 can see less than the business really earns.
Stated income programs exist for that gap. Instead of qualifying only on the income you've reported, you state an income. The lender then assesses whether it's reasonable.
Where insurance comes in
In Canada, a mortgage with less than 20% down payment generally needs mortgage default insurance.2 Insured mortgages follow the insurer's rules as well as the lender's. Some insurers have offered programs for self-employed borrowers who can't show their full income through traditional documents.
These programs are narrower than they sound. Terms change, not every lender offers them, and eligibility depends on the property, the down payment, your credit and how long you've been in business. We check what is currently available before relying on any of it.
Stated income doesn't mean unverified. It means the lender tests whether the number you give is reasonable for your business.
The reasonableness test
A lender will usually compare the income you state with what is typical for your type of business, your time in business, and what your documents do show. A stated income far above what your industry and history suggest is unlikely to hold.
- Time in business, often with a minimum
- Your industry and role, and what income is typical for them
- Credit history and how you manage existing debt
- Whether your personal taxes are filed and paid up
- The down payment and where it comes from
- NOA
Notices of AssessmentShows filed returns and no taxes owing.
You - Business
Proof the business existsArticles of incorporation, registration or licence.
You - Bank
Business bank statementsSupports that the business is active.
You - Down
Down payment historyWhere the funds come from, usually over recent months.
You
A stated income file isn't always the best route. Insurance premiums and program terms can differ from a conventional mortgage, and a file with a larger down payment or a corporate income approach may compare better. Whether to report more income in future years is a tax question for your accountant. We compare the financing paths your file opens today.
Gaurav Sophat, Mortgage Agent Level 2 · DLC FC Funding #10671
Explanations are general. What a lender accepts depends on its current requirements, your documents and your circumstances.
Compare what a lender may approve with what the 35% rule suggests in the affordability calculator.