Everything You Know about CMHC Borrower Eligibility
-Available to self-employed borrowers including:
- Self-employed 100% commission
- Self-employed contract
- Self-employed seasonal
- Self-employed small business owners
- Self-employed professional
CMHC BFS Borrower Requirements
Must demonstrate at least 2 full years of operation of their business.
If a borrower has been working for an extended period of time and recently became self-employed in the same field, performing essentially the same function with the same skill requirements, the 2 year BFS requirement does NOT apply.
If a borrower has been working for an extended period of time and recently became self-employed in the same field, performing essentially the same function with the same skill requirements, the 2 year BFS requirement does NOT apply.
CMHC Methods for Confirming 2 Year Minimum Time of Business Operation
-T1 generals supported by the Notice of Assessment.
-Business credit reports.
-Active business bank accounts (must confirm the name of the business owner – i.e. signing authority).
-Business license.
-Articles of Incorporation for a corporation.
-Audited financial statements.
-Financial statements prepared by a practicing accountant.
-Business credit reports.
-Active business bank accounts (must confirm the name of the business owner – i.e. signing authority).
-Business license.
-Articles of Incorporation for a corporation.
-Audited financial statements.
-Financial statements prepared by a practicing accountant.
CMHC Methods of Confirming BFS Income
-Notice of Assessments from CCRA (Line 150).
-Audited financial statements or financial statements prepared by a practicing accountant.
-Income amount is determined by averaging the income of the previous 2 year period.
-For borrowers who can demonstrate income increases year-over-year for 4 years or more, income for the most recent year may be used.
-Audited financial statements or financial statements prepared by a practicing accountant.
-Income amount is determined by averaging the income of the previous 2 year period.
-For borrowers who can demonstrate income increases year-over-year for 4 years or more, income for the most recent year may be used.
CMHC Guidelines on BFS Income Gross Up
-Total income (Line 150) on the Notice of Assessment is grossed up by 15%.
-Can gross up income by 15% OR use eligible add backs to income but not both.
-Can gross up income by 15% OR use eligible add backs to income but not both.
CMHC Guidelines on Eligible Add Backs
-Borrowers who have eligible deductions in excess of 15% of the income on their Notice of Assessment may opt to provide audited or accountant prepared financial statements to support a higher income level, in lieu of the standard 15% gross up.
-Eligible add backs to Net Income Before Taxes are:
-Eligible add backs to Net Income Before Taxes are:
- Business-use-of-home
- Motor vehicle expenses
- Capital cost allowances
CMHC Guidelines on Personal Income Tax Arrears
-Confirmation is required that the self-employed borrower does not have any outstanding federal or provincial personal income taxes.
-The Notice of Assessment is sufficient confirmation that the personal income taxes are paid up-to-date.
-If there are income taxes owing, the lender must confirm that the outstanding amounts have been paid, prior to advancing the loan. Taxes owing are considered default management.
-The Notice of Assessment is sufficient confirmation that the personal income taxes are paid up-to-date.
-If there are income taxes owing, the lender must confirm that the outstanding amounts have been paid, prior to advancing the loan. Taxes owing are considered default management.
Filed under: Self-Employed Mortgage (BFS)
