As Canada’s housing market continues to grow, self-employed homebuyers have emerged as a segment that simply cannot be ignored. In fact, data from Statistics Canada (StatCan) found that more than 2.6 million Canadians identified as self-employed in 2022.
However, the spectrum of what a modern self-employed borrower looks like is wide, ranging from the traditional image of a mid-income small shop owner to a more specialized and higher-income IT or financial consultant.
Official figures reflect the growth of this segment, with StatCan noting a steady increase in self-employment in professional, scientific and technical services over the last three decades.
Carmen Costa, principal broker and owner of TCG Lending Centres, says that the variety of self-employed borrowers within her own business has been changing as well.
“From one end of the spectrum to the other, we are experiencing an evolution in this segment,” says Costa.
Gareth Cahill, a broker with Dominion Lending Centres, agrees, noting that today’s self-employed borrowers come “in all different shapes and sizes.”
“We are especially seeing this in the IT field and construction industry, as well as with real estate agents and numerous consultants out there,” says Cahill.
What an evolving self-employed segment means for your business
The evolving spectrum of self-employed borrowers makes one thing clear: a one-size-fits-all approach to this segment just won’t cut it. After all, the circumstances of the owner of a convenience store will be substantially different from those of a financial consultant.
“This is where brokers come in,” says Cahill. “There is an increasing need for self-employed borrowers to work with someone who can offer financing expertise – someone who listens to their story and finds options for them to be able to buy homes, access their equity and invest in real estate.”
With such a range of professional and financial circumstances, brokers can benefit from paying closer attention to the stories of their self-employed clients. This is especially true when assessing the requirements of a self-employed client to demonstrate their story and find the right solution for their goals.
All the details matter: Maximizing the discovery meeting
As a veteran in the mortgage brokering space, Costa understands the importance of listening to the stories of self-employed clients. In fact, she believes that one vital phase to understanding a borrower’s story is at the discovery meeting.
“My agents are taught to always have a discovery meeting with their clients before collecting documents and getting into the application process,” she says. “It is a key session and important to understand any client’s story when it comes to providing solutions. This is where you will discover their risk tolerance and what best product suits them.”
At this meeting, Costa encourages self-employed clients to describe their business “at a dummy level.”
“What product or service do you offer? What type of business do you have: sole proprietor, partnership or incorporated? With this information, I can envision what the structure of the business looks like.”
As a seasoned broker himself, Cahill emphasizes the importance of understanding the entirety of a borrower’s business – including asking to see their bank statements upfront, looking through their expenses and reconciling their financial story with their tax returns.
“I’ll ask what they believe their true income is, and not just what they show as revenue,” says Cahill. “That is the number we will work with to get things done.”
From this point, savvy brokers will be able to effectively share what they’ve learned from their clients’ stories with lenders. This means putting together thorough packages that include all relevant requirements – such as licenses, contracts and account statements – and structuring deals around their clients’ unique stories.
“The key is having the right professionals assist you by listening to your financial story, keeping you on track with your requirements and communicating your story with the lender,” says Costa.
Alternative lenders and the Home Trust advantage
Of course, the other side of the process is working with a lender that understands the unique needs of the self-employed segment. Fortunately, alternative lenders offer sufficient latitude to the wide-ranging needs of self-employed borrowers.
“As brokers, we can explain why a traditional big bank cannot offer a solution and why we need to take advantage of other lending options – lenders who will listen to a self-employed borrower’s story and look at the whole picture,” says Cahill.
Among alternative lenders, Home Trust stands out for its extensive experience in servicing self-employed home buyers and a strong commitment to listening to and understanding your clients’ stories to help them find the best solution for their homeownership goals.
“Home Trust is a great resource for self-employed home buyers,” says Costa. “They provide valuable solutions for clients in that segment looking to enter the market.”
Meanwhile, Cahill says that Home Trust “has been a very strong partner in this business as a lender who is always on your side.”
“Home Trust is just great to deal with,” says Cahill. “The business development managers we have worked with have all been very communicative. They are there when we need them, answering their phones or returning calls, and always make themselves available to go over a potential deal.”