Peter, a self-employed contractor, reports varying income on his T1 Generals. In 2021, his net income was $70,000, and in 2022, it was $50,000. He is applying for a mortgage in early 2024. How would a conventional lender typically assess his 'net qualifying income' from his T1 Generals?

Question: Peter, a self-employed contractor, reports varying income on his T1 Generals. In 2021, his net income was $70,000, and in 2022, it was $50,000. He is applying for a mortgage in early 2024. How would a conventional lender typically assess his 'net qualifying income' from his T1 Generals?

Answer options:

• Use $70,000, as it's the higher of the two years.
• Use $50,000, as it's the most recent assessed income. ✅ Calculate the average of the two years, which is $60,000.
• Require three years of T1 Generals and use the lowest income.

Correct answer: Calculate the average of the two years, which is $60,000.

Explanation: For self-employed individuals, lenders generally calculate the average of the net income from the most recent two years' T1 Generals to establish a consistent qualifying income, as per standard underwriting guidelines for BFS clients unless consistent growth can be demonstrated.