You write your income down at tax time — can you still buy?

What does a lender mean by income?

For an employee it is the T4 and an employer letter. For someone self-employed it is net income on the return. Either way, the Notices of Assessment have to line up.

With that number, lenders apply two ratios: housing costs against income, and all debt payments against income. Car loans, credit card minimums and student loans land in the second one.

So borrowing room is not arbitrary. Push the income side down while the debt side stays put, and the mortgage that fits between them shrinks.

What does a low number actually block?

It caps your maximum loan, not your eligibility.

Say reported income is 60,000 and you carry a 500 monthly car payment. Clear the car loan and the maximum moves up right away. Those figures are for illustration only, and the real effect depends on the lender.

Which is why order matters. Get the number first, then pick a price range. Doing it the other way costs time, and sometimes a deposit.

Are there other ways to count income?

There are four common ones.

Bank statement programs that read business deposits; other income added in, such as a legal rental suite or two years of steady part-time or investment income; a co-applicant; or a larger down payment so you need less mortgage.

Most files use more than one at once. Which combination is worth it depends on what you can document.

Does adding a co-applicant help?

Yes, when their own income and credit can carry it.

A co-applicant is usually a parent or a spouse. Their income counts, and so does the mortgage: it becomes their debt too, which affects what they can do later. Settle how title is held and how they come off the loan before anyone signs, and ask your accountant about the tax side.

What does an alternative lender cost you?

More, on a shorter term, and usually as a bridge rather than a destination.

These lenders accept a different income calculation in exchange for higher costs and different terms, sometimes including a lender or broker fee. The numbers are set by the file, so I will not quote any here.

The important part is the exit plan. Generally that means two or three years to clean up filings, credit and savings, then a move back to a mainstream lender. Plan the way out before you go in.

What can you do right now?

Pay down debt, build a paper trail, and stop applying for things.

Clear the small debts with the biggest monthly payments, car loans and card balances especially. Run income through your accounts so that six months from now the statements are the evidence. And take on no new financing or card applications while you are getting ready to buy.

Then bring it to me, get the number, and start looking after that.

Common questions