John, a self-employed graphic designer in Toronto, Ontario, has applied for a mortgage. He provides two years of business financial statements, which show inconsistent net income after expenses, largely due to varying contracts. His personal T1 Generals align with the BFS. Which statement best reflects a mortgage agent's approach to assessing John's income for standard lenders?

Question: John, a self-employed graphic designer in Toronto, Ontario, has applied for a mortgage. He provides two years of business financial statements, which show inconsistent net income after expenses, largely due to varying contracts. His personal T1 Generals align with the BFS. Which statement best reflects a mortgage agent's approach to assessing John's income for standard lenders?

Answer options: ✅ The mortgage agent must use the average of the last two years' net income from his T1 Generals and Notice of Assessments for standard income qualification.

• The mortgage agent should only consider the most recent year's higher income as an acceptable baseline, assuming all documents support it.
• The mortgage agent can use 'stated income' programs, bypassing the need for T1 Generals and financial statements, provided John has a good credit score.
• The mortgage agent must prioritize the gross revenue from his business as the primary income source, regardless of expenses.

Correct answer: The mortgage agent must use the average of the last two years' net income from his T1 Generals and Notice of Assessments for standard income qualification.

Explanation: For self-employed individuals, standard lenders typically assess income using the net income reported on T1 Generals and Notices of Assessment (NOAs) over the last two to three years, often using an average, as per lender guidelines for income qualification.