You just bought a business and it’s already making a profit. The next step in your plan is to buy a home or refinance your existing home.
How Buying a Business Affects Your Mortgage Approval
Understanding the Link Between Personal Income and Business Ownership
Lenders want to know that you can afford mortgage payments. When you buy a business, your personal income may change—especially if you’re reinvesting in the company. Traditional lenders usually look at your last two years of tax returns, which can make things tricky if you’re in transition.
What Lenders Look For During Transitional Income Phases
Lenders will try to support your income in a few different ways:
- Bank statements to show the stability of the business
- Accountant prepared financials
- Some history showing that you know how to run that type of business
- Related income history for yourself in that line of work
Mortgage Options for Entrepreneurs and Business Owners
Conventional Mortgages with Verified Income
If your income is well-documented, you may qualify with traditional lenders. This typically requires two full years of self-employed income, strong credit, and solid financial statements. In many cases, lenders can use a 2 year average of employment income if it’s in a related industry or line of work.
Alternative Lending for Non-Traditional Income Scenarios
If you’re newly self-employed or have fluctuating income, alternative lenders offer more flexible underwriting. They may use stated income, business bank statements, or a net worth-based approach.
How the Canada Small Business Financing Program Can Help
While CSBFP doesn’t apply directly to residential mortgages, it can help keep your business cash flow strong—which improves your personal affordability. Use CSBFP to finance business assets, freeing up personal resources for your mortgage.
Strategies to Increase Your Chances of Approval
Maintain Excellent Personal Credit
Even if your business is new, strong personal credit reassures lenders. Pay bills on time and avoid overusing your credit cards.
Keep Personal Debts Low
Lower personal debt means better debt servicing ratios. If possible, pay down credit lines and loans before applying.
Build a Reserve Fund to Show Stability
Having cash reserves shows you can handle surprises. Lenders love to see an emergency fund—especially when your income is new or variable.
Common Myths About Getting a Mortgage as a Business Owner
“You Need to Wait Years After Buying a Business”—False
While some lenders prefer a 2-year history, many others will approve new business owners who can prove current income or provide bank statements.
“Business Debt Kills Your Mortgage Chances”—Not Necessarily
Business loans aren’t included in your personal debt servicing ratios. What matters more is how your income stacks up against your personal obligations and creating a lender package that makes sense to them.
Frequently Asked Questions (FAQs)
Can I Get a Mortgage Right After Buying a Business?
Yes, if you can show that your income is stable, projected to grow, or supported by strong assets or co-borrowers. You may need to use a stated income or alternative lender.
Are There Specific Mortgage Programs for Entrepreneurs in Canada?
Yes! Aside from just alternative lending and stated income, there are several programs that are designed for business owners.
Owning a Business and a Home is Within Reach
With Strategy, Paperwork, and the Right Advice—It’s Possible
Buying a home after becoming a business owner isn’t out of reach—but it does require strategy. With the right plan, lender, and documentation, you can qualify even if your income looks different than a salaried employee’s.
Work With a Mortgage Advisor Who Understands Entrepreneurs
Most banks aren’t set up to understand self-employed income. A mortgage advisor who specializes in working with business owners can help you package your deal, explain your story, and find the right lender for your situation.