Required Mortgage Documents
NO ONE likes to do paperwork or compile documents.
But, if you want to secure a mortgage and own your own home, then a little paperwork will be necessary.
Your Mortgage broker and Lender will require numerous documents in order for your mortgage to be approved. Getting these documents together may seem overwhelming, because your ability to borrow money relies upon what those documents say about your financial well-being.
But, once you start running down the easy checklist we made, you’ll find that it won’t be so bad.
Below we’ve compiled a collection of many of the required mortgage documents you’ll need to secure a home loan.
1. Proof of Income for Salaried or Hourly Workers
Mortgage Lenders need to see proof of income in order to feel comfortable with the risk of loaning you money.
Your income is essentially the primary deciding factor in whether or not you’ll get a mortgage and how much money you can borrow once you’re approved. Thus, providing all the forms of income you receive is vital to getting your application approved.
Of course, people receive income in a variety of different ways, which means you’ll have to prove your income based on how you make money.
For those who have salaried or hourly positions, your proof of income will usually consist of at least one of the following:
- T4 tax forms (your employer will provide this to you)
- Pay stubs from at least the last two months
- A signed letter from your employer (usually on company letterhead)
These documents confirm a number of things: your salary or hourly wage, your job title, the length of time you’ve been working in your position, and possibly other details depending on the institution.
Been at your job for less than 2 years?
You may also be required to provide confirmation of previous employment.
Proof of Income for the Self-Employed and Everyone Else
What happens for those who work off of commissions or who are self-employed?
Obviously, you won’t just get a T4 tax form from your employer, because, in most cases, you are your own employer. In those instances, you’ll have to obtain different documents to prove your income.
If you’re a commissioned or freelance employee, you’ll usually need one or more of the following:
- T4s from employers that have paid you and the terms of the commission (if available)
- Proof of income from the past two years (via bank statements or accountant statements)
- Notice of Assessment from the past two years from the Canada Revenue Agency
If all else fails, a Notice of Assessment from the Canada Revenue Agency is your best bet. Those with a sole proprietorship will likely also need a Notice of Assessment from the past two years or T1 General tax forms. In either case, some lenders may require you to provide audited financial statements or such statements prepared by an accountant.
Remember, the better your income looks on paper the better chance you will have at getting approved.
There are also plenty of other sources of income or employment types that you should report to your lender These include:
- Seasonal work
- Part-time work (particularly if you have two part-time jobs or work an extra part-time job on top of your full-time job)
- Rental income
- Child assistance or income from child tax benefit
- Child or spousal support
- Universal child care benefit
- Foster care income
This isn’t an exhaustive list, but you can get a good idea of the types of income you will need to divulge to your lender. Of course, we can help you figure out exactly what sources of income you’ll need to prove and what documents you’ll need to do so.
Information on Debts and Liabilities
This is the category of required mortgage documents that many people try to avoid. The more debts you have, the less likely you’ll get approved for a loan in the desired loan amount. At the same time, it’s never a good idea to withhold debt information from your lender because they will find out anyway when they look at your credit history.
If you’re debt-free, then you don’t have to worry about it obviously. But, some debts that you should inform your lender of include:
- Credit card balances and limits
- Car leases and loans
- Lines of credit
- Student loans
- Spousal or child support fees
- Personal loans
- Other loans on properties
Once you have that out of the way, you can move on to assembling the documents for your down payment.
Down Payment Verification Documents
Lenders need to know that their borrowers have down payment funds ready and waiting. There are many sources for securing a down payment but the real goal here is to let the lender know that you have the cash in hand.
There are really four main ways to make a down payment:
- Investments (e.g. RRSP, GIC, stocks, bonds, etc.)
- Other credit sources (e.g. line of credit, personal loan, etc.)
To verify your down payment via savings, investments, or other credit sources, you’ll usually just need to provide bank or account statements (with your name and account number on them) from at least the last three months.
If you are receiving your down payment as a gift (such as from a family member or friend), then you’ll need what’s known as a “Gift Letter.” The letter will verify that the gift requires no repayment. You will also, of course, need documentation to show that the gifted money is in your account.
Property Documents and Other Information
After you’ve proved your income, made your debts known, and verified your down payment, you’ll need to come up with a few other documents usually relating to the property itself.
- A copy of the sales contract
- A copy of the MLS listing and description
- Signed mortgage agreement
- Address of the property
- All relevant contact information for your lawyer, builder, and realtor
- For condo buyers, a condominium declaration, fees, budget, and regulations
- Certificate for the well or septic tank (usually only on rural properties)
You’ll also need to provide your up-to-date banking information including account numbers, branch info, transit numbers, balances, and contact information.
Does this seem like A LOT of work?
You can bypass a lot of this at purchase time by opting for a mortgage pre-approval.
In any event, there’s clearly a lot of information that you need to get together in order to make your dream home your own. We can help guide you along the way so you never have to worry about whether you have all the required mortgage documents or not. We’ll be sure that you know what you need and you know how to get it.