Stated Income Mortgages are made to cater to the self-employed borrower. By utilizing a stated income product, self-employed borrowers do not need to prove their income through traditional third party formats like a job letter or paystubs. Instead, we are able to “state” your income at an amount that is reasonable for your industry experience and the type of industry you work in provided you have documentation to show you are business for self.
As I am sure you have heard, there has been rumblings in the news about CMHC insuring fewer mortgages and that leads to speculation about what is going to happen next and how will it affect me?
We have already seen at least 2 of our big 5 bank lenders eliminate their stated-income program, most notable being Firstline, a division of CIBC. Don’t be afraid of the sky falling just yet though, this isn’t the first time stated-income mortgages have been up on the chopping block and most likely not the last! So what does that mean for going forward?
I believe we will see our stated income products change, but not disappear. The mortgage world is cyclical, just like everything else. We will likely see the guidelines for self-employed products tighten up in the near future and a bit higher interest rates to mitigate some of the risk. That being said, it’s not a bad thing that Canadian regulators keep an eye on things as overextension can lead to default and it is better to act early than to react later when actions would have to be more drastic. Back in 2010, we saw the minimum down payment for insured stated-income mortgage products increase to 10%, from 5%, however, that did not significantly lessen the demand for the product, so “need” reigned supreme and I would say self-employed mortgages still account for at least 25% of the mortgage applications we see here at MortgageGirl.
Bottom line, don’t worry if you are a self-employed borrower as you will still have mortgage financing options however, do ensure you know what to expect when it comes time to get a mortgage as a self-employed borrower who needs a stated income product.
If you would like more details about the mortgage requirements for self-employed borrowers and how they differ from other mortgage products, please do not hesitate to contact your trusted mortgage professional.