HOW INCOME QUALIFYING REALLY WORKS FOR MORTGAGES

Income qualifying is one of the biggest hurdles when applying for a mortgage—especially for self-employed borrowers.

Understanding what lenders look for will save you stress, time, and surprises.

See what documents you need and how lenders assess income 👇

1️⃣ Start by identifying your employment type

Lenders first categorize how you earn income.

✔️ salaried employee

✔️ self-employed / sole proprietor

✔️ incorporated business owner

Each category requires different documentation and verification methods.

2️⃣ If you're a salaried employee: required documents

Lenders want to confirm stability, consistency, and accuracy.

✔️ last 2 years of T4 slips

✔️ last 2 Notices of Assessment

✔️ recent pay stub

✔️ employment letter

✔️ 90-day bank history for down payment

These items verify both your income and closing funds.

3️⃣ If you're a sole proprietor: required documents

Self-employed borrowers must provide additional proof due to income variability.

✔️ last 2 years of full T1 Generals

✔️ last 2 Notices of Assessment

✔️ business license or registration

✔️ GST/HST filings

✔️ 90-day bank history

This ensures lenders can see business legitimacy and stability.

4️⃣ If you're incorporated: required documents

Incorporated owners often draw income differently, so lenders verify multiple sources.

✔️ last 2 Notices of Assessment

✔️ articles of incorporation

✔️ financial statements

✔️ GST/HST filings

✔️ 90-day bank history

Verifiable income is required, even if drawn as dividends.

5️⃣ Work with a qualified accountant (or use stated income properly)

Your accountant must understand your mortgage goals.

✔️ structure income correctly

✔️ avoid excessive under-reporting

✔️ plan ahead for qualification

Stated income can be used—if reasonable and justifiable.

6️⃣ Stated income rules (important limitations)

Stated income must reflect realistic industry earnings.

✔️ allowed for primary homes

✔️ purchase-plus-improvements

✔️ second homes

✔️ rental properties

It cannot be exaggerated—lenders compare industry norms.

7️⃣ Insurance guidelines for stated-income applications

Default insurers set strict rules for approval.

✔️ credit >680 → GDS/TDS 39/44

✔️ credit <680 → GDS/TDS 35/42

✔️ no personal taxes owing

These ratios must be met before lenders sign off.

💬 Final Thought

Income qualifying is one of the most important steps in mortgage approval. Proper documentation and structured income planning make the process far easier and reduce stress.

If you want us to review your income situation and identify what you qualify for, The Frontline Mortgage Group can prepare a clear roadmap before you apply.