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Self-employed qualifying income helper

Get a starting estimate of the income a lender might use from your business. Then talk to us about how to present it well.

Your numbers

A starting view of qualifying income. Lenders vary widely.

Items some lenders add back, for example capital cost allowance (depreciation) or other non-cash deductions.
Estimated qualifying income
$0 / year
Two-year average$0
Selected base$0
With add-backs$0
Illustrative grossed-up (15%)$0
The 15% gross-up is illustrative and available on some insured programs only.
Talk to us

For illustration only and not an offer of financing or a rate quote. Lenders treat self-employed income very differently, some average two years, some use a gross-up, and alternative lenders use bank statements. Documentation drives the result, and this is a starting estimate only. Speak with us for figures specific to you. TMG HarbourTown Mortgage Inc., Licence #3000145.

What these numbers mean

Plain-language definitions and the typical ranges, so you can play with the inputs with confidence.

Net business income, year 1 and year 2
Your business income after expenses, usually the figures from your tax returns or financial statements over your two most recent years. Lenders look at the trend, not just the latest number.
Typical: two most recent years of net self-employed income
Add-backs
Non-cash deductions some lenders allow you to add back to income, for example capital cost allowance (depreciation) or certain one-time expenses. Not every lender accepts the same add-backs, so treat this as a starting estimate.
Typical: capital cost allowance and similar non-cash items, lender-dependent
Method
Two-year average smooths year-to-year swings; most recent year uses the latest figure. When income declines, lenders often qualify you on the lower, most recent year rather than the average.
Typical: two-year average, or the most recent year if income is declining
Illustrative grossed-up (15 percent)
Some insured programs let a portion of self-employed income be grossed up by 15 percent to reflect tax treatment. It is program-specific and not always available, so it is shown here only as an illustration.
Typical: up to a 15 percent gross-up on some insured programs only
Qualifying income and how it is used
The income figure a lender would carry into your application. It then feeds your GDS and TDS ratios against the stress-test qualifying rate, which is the greater of your contract rate plus 2 percent or 5.25 percent. Strong documentation drives the result.
Typical: GDS up to 39 percent and TDS up to 44 percent on insured deals
These are general ranges, not your numbers. The right figure depends on your situation, the property, and the lender. Talk to us and we will pin it down.

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