I can verify what RickJay is saying. I was self-employed when we bought our first home. I had been the principal owner of the business for about 5 years at that point. The bank was willing to lend me the money, but only if I jumped through an awful lot of hoops. They wanted income statements, tax returns, business plan, assets and liabilities, all sorts of stuff.
In the end, it was easier to just use my wife’s employment income from a normal job to qualify for the loan. And because we only had about 15% to put down on a house, we had to take out a high-ratio mortgage and pay extra (quite a bit extra) for the CMHC home insurance that protected the bank from a default.
In Canada, not only do you have to prove income, but the bank won’t give you a mortgage that pushes your total debt payments up above a certain percentage of your take-home pay. When you apply for the mortgage you have to disclose all other loans, credit cards, auto payments, etc. If you’re carrying too much debt, you can have $100,000 in income and the bank still won’t give you a mortgage.
Back to the OP: It’s simplistic to say that Canada simply has ‘stronger regulations’. The relationship between bank regulators and bankers in Canada is very different than it is in the U.S., as is the entire banking culture. Canadian banks have a culture and history that makes them much more conservative than American banks. Young bankers coming up through the system have this conservative culture drilled into them. Regulators are seen more as high-level partners helping to keep the banks sane, and aren’t viewed as oppositionally as they are in the states. They also tend to work together with banks to figure out sane rules, rather than having a Congress write rules and hand them down from on high.
And has been mentioned before, you can not under-estimate the other factors that kept our real-estate bubble in check - we don’t have a home interest deduction, we have tougher rules for getting mortgages, etc. Our government doesn’t lean on bankers to provide mortgages to people who can’t afford them. Low down-payment mortgages have to have additional default insurance that the homeowner must pay for. We don’t have a Fannie and Freddie buying up mortgages that are too risky for banks to hold, off-loading risk from the banks and giving them an incentive to hand out risky mortgages.