LIMITATIONS ARE HERE FOR SELF EMPLOYED SELF DECLARED INCOME!

March 09, 2010

Insured Stated Income Programs Tighten Up

CMHC has felt for a while that too many people apply for stated income mortgages who shouldn’t.

Therefore, effective April 9, CMHC is adding more restrictions to its Self-Employed stated income product..

For one thing, it’s reducing the maximum allowable loan-to-value. 

Self-employed borrowers who choose to apply under this program, and not verify their income using traditional means, will have to put down 10% when purchasing a home (instead of 5% today).

Stated income applicants who wish to refinance will be limited to 85% loan-to-value (instead of 90% today).

CMHC says:

• The Self-Employed program is intended for self-employed borrowers “who have difficulty providing documentation for their current income level.” These are often people who’ve recently begun to work for themselves.
• Self-employed borrowers in the same business for over three years will no longer be eligible for approval without traditional proof of income.
• A business license, GST license, or articles of incorporation will be required to validate the applicant’s length of self-employment.
• Commissioned employees are no longer eligible for approval under the Self-Employed program.

As insurers pull back further from the stated income market, some expect uninsured lenders to eventually fill the void.  Self-employed borrowers, with hard-to document income, will then pay notably higher rates and fees as a result of using such programs.

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This is not the end of what is to come but for now if you have any questions with respect to self employed self declared income call me and we can go over your situation.