As a self-employed individual, taking advantage of write-offs that allow your income to be in a lower tax bracket may seem great. However, this may also hurt your ability to qualify for a mortgage. Lenders generally require two year of Tax Returns; two years Notice of Assessment; two years Financial Statement; statement of bank account activity; and investment income statement. Of note for those self-employed, Tax Returns will show a lower number than actual income, thus hindering them from qualifying based on income necessary to service the mortgage.
Think ahead. Two year prior to seeking a mortgage, make fewer write offs, and work to get your personal taxable income to a larger number.
Work with a certifies accountant, lender will be more inclined to consider financials prepared and submitted by a professional that will consider you financial goals of getting a mortgage.
If you want a mortgage sooner rather than later and haven’t planned for this when filing your taxes, you can use Stated Income so long as you have been in the same profession for at least two years before becoming self-employed. More documents will be required, including bank statements that prove consistent income.
Lastly, you may have to consider a B lender. B lenders will be more flexible in considering your income. Of course, this does come at a cost of a higher interest rate. But, once you have had time to increase your taxable income, in a few years, you may be able move to the A lender space.