Your income can make it easier to get lending or harder depending on how you earn it. The type of income that you earn can also effect your ability to borrow funds. Your income will change throughout your real estate investing career.
Employed – Full Time
This would be through an employer where you have worked and receive a regular income. The length iof your employment may play a factor in your approval. Banks and financial Institutions look favorably on this type of borrower. Those institutions would usually ask you for a few paystubs and a letter of employment. If there are any bonuses or additional income from these jobs, you might also be asked to prove this.
Employed – Part Time
This type of income would be used based on the total income over a two or three year period depending on the lender. In addition to the information required by a full time employee, you might also be asked to provide you Notice of Assessments from your tax returns.
You may own a company that has a bricks and mortar store, or a corporation. Your lender will most likely want to see the income that is being claimed through your tax returns for the corporation over a 3 year period. Or take a ‘stated income’ approach to lending to you based on the industry that you are in. Documentation can include a wide range of documents from a business licence and articles of incorpration, NOAs, full tax returns, and more. You may also be required to put down a larger down payment than 20%.
That’s also a reason why you might want to open a corporation and have income earned through that corporation in order to help you qualify for a mortgage before you actually need to use it. If you are transitioning to a full-time investor and not earning a salary through your employer, it might be prudent to start this corporation while you are with an employer.
This would be borrowers that earn commissions either through sales like a car salesman with a base pay, or like a Realtor based on each transaction. Most likely the lender will be looking at you Notice of Assessment for the last 2 or 3 years to determine whether to lend to you or not. In addition to the documents you would provide as being self-employed, you might also be asked to provide job letters from your employer, and or information regarding your licensing as a Realtor or Mortgage Agent.