Self-Employed Mortgages: Stated Income Programs That Close Deals Banks Reject
In this episode, Scott Dillingham breaks down stated income and bank statement mortgage programs that qualify self-employed clients based on what they actually earn, not just their tax returns. The first program Scott…
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Show notes
Self-employed buyers are often turned away by banks — even when they earn excellent income. In this episode, Scott Dillingham breaks down stated income and bank statement mortgage programs that qualify self-employed clients based on what they actually earn, not just their tax returns.
The first program Scott discusses is the insured stated income mortgage option, which requires just 10% down. This program works through mortgage default insurers including CMHC, Sagen, and Canada Guaranty, allowing mortgage lenders to approve borrowers based on reasonable stated income rather than tax returns alone. Scott shares a recent success story involving a truck driver whose tax return showed only $13,000 in declared income but was approved for $70,000 stated income—a figure validated through industry income tools. The insurer verified this was reasonable compensation for a truck driver and approved the mortgage, enabling a purchase that traditional lenders had denied. This approach is particularly valuable for self-employed individuals, contractors, and commission-based workers who write off substantial business expenses, resulting in artificially low net income on their notice of assessment.
The second program focuses on bank statement mortgages for borrowers with 20% or more down payment. Rather than relying solely on what clients report to the Canada Revenue Agency, this alternative income verification method examines 12 months of business bank statements to calculate actual income. Lenders review all deposits and intelligently subtract legitimate business expenses—like fuel costs for the truck driver example—to determine net available income for mortgage qualification. This bank statement program proves especially effective for cash-based businesses, gig economy workers, and entrepreneurs whose business financials don't fully reflect their capacity to service mortgage debt. Both programs fall under B lender mortgage solutions, which means slightly higher interest rates and lender fees (typically around 2% of the mortgage amount), but they provide critical pathways to homeownership for those with strong income but non-traditional documentation.
Understanding self-employed mortgage requirements is essential for real estate professionals and mortgage brokers working with entrepreneurial clients. Traditional mortgage qualification criteria penalize business owners for smart tax strategies, but these stated income and bank statement alternatives recognize the reality of self-employment income. The insured 10% down program offers the best mortgage rates available since it's backed by mortgage insurance, making it an attractive option for first-time buyers and those with limited savings. Meanwhile, the 20% down bank statement program provides more flexibility for established business owners with substantial equity. Scott emphasizes that lenders use tools similar to employment websites to verify that stated income aligns with industry standards—ensuring reasonable income claims while avoiding the rigid requirements that cause traditional bank rejections.
For real estate professionals, mastering these alternative mortgage programs means being able to serve a much broader client base. Self-employed mortgage lenders who understand these products can help contractors, freelancers, real estate investors, and small business owners achieve their homeownership and investment goals despite showing lower taxable income. The key is recognizing when clients need these specialized solutions: multiple bank declines, high write-offs reducing net income, cash income streams, or less than two years in business. By positioning these mortgage loan options as solutions rather than last resorts, mortgage brokers can close deals that competitors miss while building lasting client relationships. Scott's practical examples demonstrate how understanding income verification alternatives transforms challenging files into successful mortgage approvals, ultimately helping more Canadians access home financing regardless of how they earn their income.
Key Takeaways
- Insured Stated Income Program (10% Down): Work with CMHC, Sagen, or Canada Guaranty to approve borrowers based on reasonable stated income verified through industry standards—ideal for self-employed clients whose tax returns don't reflect true earning capacity; offers best available mortgage rates since it's insured.
- Bank Statement Mortgage Program (20% Down): B lenders review 12 months of business bank statements, analyzing deposits minus business expenses to calculate qualifying income—perfect for cash-based businesses and entrepreneurs with strong actual income but lower reported income on their notice of assessment.
- Income Verification Alternative: Both programs solve the common challenge where self-employed borrowers face mortgage rejection despite strong income; lenders subtract reasonable business expenses from bank deposits to determine net income for qualification purposes.
- Real-World Example: Truck driver with $13K reported income qualified for mortgage using $70K stated income (validated as reasonable for the profession), demonstrating how these programs overcome traditional lending barriers for self-employed individuals.
- B Lender Mortgage Fees: Expect approximately 2% lender/broker fees on the mortgage amount plus slightly higher interest rates compared to A lenders; the 10% down insured program offers better rates than the 20% down bank statement option due to insurance backing.
- Target Clients: These programs serve contractors, commission workers, gig economy professionals, cash-based businesses, and anyone with less than two years of documented business history or significant tax write-offs reducing net income.
Links to Show References
- LendCity Mortgages (for Pre-Approvals and Alternative Programs): lendcity.ca
- Contact Scott Dillingham: scott@lendcity.ca
- Close More Deals Podcast: For more episodes on creative mortgage solutions and closing strategies
- (00:00) - - Introduction: Two Programs That Go Hand in Hand
- (00:15) - - Stated Income Program Overview: 10% Down Insured Option
- (00:45) - - Real Example: Truck Driver Case Study ($13K to $70K Income)
- (01:15) - - How Insurers Verify Reasonable Stated Income
- (01:35) - - Bank Statement Program: 20% Down Alternative
- (01:55) - - How Bank Statement Income Calculation Works
- (02:10) - - Subtracting Business Expenses from Deposits
- (02:25) - - Comparing Both Programs: Rates and Fees
- (02:40) - - When to Use These Programs for Your Clients
- (02:50) - - Resources and Getting Started with Alternative Lending
Realtor questions from this episode
What stated income program works with 10% down?
Scott says it is an insured program with CMHC, Sagen or Genworth where the application states the client's income, which has to be reasonable. His example is a truck driver who showed about $13,000 on his notice of assessment and was approved using $70,000 because that was a reasonable income for the job. Tools such as Glassdoor show typical income ranges for a role and location.
How does the bank statement program work?
With 20% down or more, the client provides bank statements, for example twelve months, and the lender adds up deposits and subtracts apparent business expenses such as fuel. The net is used as income instead of what was filed with the CRA.
What is the trade-off between the two programs?
Scott says the 10% down insured program gets the best rates in the market, while the B lender stated income program has fees attached and slightly higher rates.
Transcript
Transcript of the episode as recorded. Rates, fees and program details are as stated on the recording date and may have changed.
Welcome back to the Close More Deals podcast.
Welcome back to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I have two programs that go hand in hand that I'm gonna be discussing with you today to help you to close more deals. So they're stated income programs. We have one program that requires a 10% down payment program and essentially what we do is we can work with an insurer, so we can work with CMHC, Sagen and Genworth and what we do is we submit the application to them and we state the client's income, it has to make sense though, so for an example, we had one of these approved very recently, was a truck driver, he showed about 13,000 on his like notice of assessment.
So that's what he claimed. We were able to get them to use 70,000 because $70 for a truck driver to make was reasonable. So they move forward and we helped the client purchase a home where his bank had said, nope, you only make 13 k, we can't help you. So the program is within reason and they use tools like Glassdoor. A Glassdoor will tell you what the potential range of income is for a certain career based on location as well because that does have an impact.
I think that's a great guiding point because it does show a range that makes sense. So that's program one is if your borrower has 10% down, we could potentially do that depending on what it is that they do. The second program, your borrower has to have 20% down or more, but with that, we're then using the bank statement program. So now what we're looking at is not necessarily what they file with CRA. We all know lots of people get paid cash and sometimes it may not show up on their tax return, but with the bank statement program, what it does is it allows the clients to provide their statements and we look at all their deposits.
So we kind of add that up and they do subtract what appears to be business expenses. So again, let's go back to the truck driver example, but let's say you supply twelve months bank statements, they're gonna subtract your fuel expenses, right? They're gonna tell like that corresponds with your business, so you have to pay that. What's left, the net that's left, they'll let us use as income, which is fantastic, And then that could potentially help us to qualify your client again for money when they wouldn't be able to.
Now the B lending stated income program, there's fees attached to that,…
Now the B lending stated income program, there's fees attached to that, right? It's a B lender, slightly higher rates, where the 10% down program that's insured, so you're getting best rates in the market. So those two programs I use all the time and I hope that now that you know about them, you can use them too, to help yourself to close more deals. So if this podcast was helpful and useful, please check the show notes below, we have more resources for you and would love to work with you and your clients. Thank you so much.