The Basics When Applying for a Mortgage
Applying for a mortgage can be daunting and frustrating; but, it doesn’t have to be. Here are some common things you’ll be asked for, which will help make it an easy process.
Permanent Employee Position: If you’re full time/part time and have a guaranteed base salary without overtime or bonuses, be prepared to provide a current job letter, recent pay stub, and a recent T4/NOA. If you have a guaranteed base salary with overtime and bonuses, you’ll require the same as above, but you’ll need your T4s/NOAs for the last two years so we can work out an income average. If you don’t have a guaranteed base salary, we’ll require this as well. Banks also want to make sure you’re off probation. If you’re not, just make sure that your deal completes at least two weeks after you’ve passed the probationary period.
Casual Employee Position: If you’re working on a casual basis, banks will require a current job letter, recent pay stub, and your T4s/NOAs for the last two years.
Self Employed or Commission Based: If you’re self-employed, you’ll be asked for your two most recent years of T1 Generals (tax returns), Notices of Assessment (NOAs), business financials, and proof of self-employment (i.e., certificate of incorporation). If you’re commission based, you’ll require a job/contract letter, recent pay stubs/deposits and your two most recent years of T1 Generals (tax returns) and Notices of Assessment (NOAs).
Retired: If you’re at this sweet point in life and require a mortgage, you’ll be asked for your T4As, NOAs, 3 months of recent bank deposits confirming pension income, and any pension letter outlining what you’re entitled to.
Savings/Investments/RRSPs/TFSAs/Etc: You’ll be required to show a 90-day history of the money in these accounts. You can provide actual statements or print screens of online accounts, but just make sure that your name appears on the statements to prove that you own the account. If your name doesn’t appear, then provide a snapshot of your account summary, which will show your account numbers and name – this way we can cross-reference it for the lenders. If the money has not been there for 90 days, then you’ll have to be able to show where it came from (i.e., liquidated investments, gifts, inheritance, etc.).
Gift: If your money is being gifted to you, then you’ll need to show the money deposited into your bank account two weeks prior to completion along with a signed gift letter, which will be provided to you. The gift needs to be from the immediate family.
Sale of property: If your down payment is from the sale of your current property, then we’ll need a copy of the firm sale contract. If you’ve already sold it and have the money, then we need to see a copy of the statement of adjustments/order to pay (your lawyer gave this to you) along with proof of the monies being deposited into your bank account.
For any property you own, we’ll need a copy of the current mortgage statement and property tax statement. If any property is a rental, we’ll need a copy of the lease as well. Banks like to see fixed term tenancies and, oftentimes, you’ll be asked to show the last three rent deposits to confirm the validity of the rental.
Have any? Most people do. Basically, banks will apply a 3% re-payment based on any balance your credit bureau shows for credit cards and unsecured debt. Interest-only payments are a thing of the past when qualifying for a mortgage. The only exceptions granted for unsecured debt are for professional student lines, where 1-2% may be considered. For secured debt (credit lines), either an actual payment will be used or a payment based on amortizing the balance at the contract rate over 25 years.
If you have good credit, you don’t have anything to worry about when we check it. If you don’t or are uncertain about the status of your credit, it may be worthwhile to check your own bureau through Equifax, which will not have a negative consequence on your rating.
How much do you qualify for?
Try our affordability calculator for a quick answer! These are the basics when applying for a mortgage. Other issues can obviously come up, but for the most part, if you’re organized and aware of what you need and why it will make the process of applying for a mortgage very painless.