A self-employed applicant applying for an uninsured mortgage provides business financial statements. What is a key consideration for the lender when assessing their income for GDS/TDS calculations?

Question: A self-employed applicant applying for an uninsured mortgage provides business financial statements. What is a key consideration for the lender when assessing their income for GDS/TDS calculations?

Answer options:

• Only the gross revenue of the business is used. ✅ The applicant's declared personal income on their tax return (NOA) is prioritized.
• A fixed percentage (e.g., 50%) of their business's net profit is used.
• Employment income from a secondary job is always excluded if available.

Correct answer: The applicant's declared personal income on their tax return (NOA) is prioritized.

Explanation: For self-employed individuals, lenders typically rely on the applicant's Net Income after expenses, as declared on their personal tax returns (Notice of Assessment - NOA), often averaged over two years, to calculate qualifying income. Gross business revenue is not a reliable indicator of personal income available to service debt.