A self-employed borrower, Jonathan, has been operating his consulting business for 2.5 years in Mississauga. His recent two years of Notice of Assessment (NOA) show net incomes of $75,000 and $80,000 respectively. However, he is paid through his incorporated company and typically withdraws minimal salary, leaving profits within the company for tax planning. He can provide sound financial statements showing consistent gross revenue of $200,000+ and strong retained earnings. He is seeking a mortgage for a $900,000 property with a 20% down payment. Which scenario best describes how a broker should approach this?

Question: A self-employed borrower, Jonathan, has been operating his consulting business for 2.5 years in Mississauga. His recent two years of Notice of Assessment (NOA) show net incomes of $75,000 and $80,000 respectively. However, he is paid through his incorporated company and typically withdraws minimal salary, leaving profits within the company for tax planning. He can provide sound financial statements showing consistent gross revenue of $200,000+ and strong retained earnings. He is seeking a mortgage for a $900,000 property with a 20% down payment. Which scenario best describes how a broker should approach this?

Answer options: ✅ The broker should primarily use his declared NOA income for qualification with most A-lenders, but also explore B-lenders or credit unions that may consider gross revenue or business bank statements as part of a stated income program.

• Jonathan will only qualify based on his NOA income, which will likely limit his borrowing capacity.
• He must restructure his income to a higher T4 salary for a minimum of two years before applying for a mortgage.
• The broker should advise him to liquidate his retained earnings into personal accounts to be considered as eligible income.

Correct answer: The broker should primarily use his declared NOA income for qualification with most A-lenders, but also explore B-lenders or credit unions that may consider gross revenue or business bank statements as part of a stated income program.

Explanation: While A-lenders typically rely on NOA income, many B-lenders and credit unions offer 'stated income' or 'business for self' programs that can utilize gross revenues, business bank statements, or a percentage of gross sales, especially for well-established self-employed borrowers with strong financials, even if net income on NOA is lower.