April 26, 2021
April 26, 2021
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Whether you are buying a new home or refinancing your existing one, the most daunting task can be getting approved for a mortgage.
If you are on the path to home ownership, your first step should be finding the right mortgage product and rate for you. Getting a mortgage is more complex than fixed vs. variable – it’s a major financial decision so you want to make sure you get it right!
To start, we created a mortgage document checklist to help you gather all the documentation you’ll need to finalize the mortgage process quickly and efficiently. Every mortgage application is different but this is a standard list of requirements for most lenders.
Individual banks and lenders may have different requirements and may ask for additional documentation to support your application. That’s why you should always consult with a Mortgage Broker to help guide you through the mortgage process. Download the PDF version of the checklist at the end of this article.
It is in your best interest to get pre-approved for a mortgage prior to starting a mortgage application or looking at new homes. A pre-approval letter is valid for three months. It shows sellers you are ready to buy and gives you a better idea of your budget before you start your home search.
Your banking information (bank issued account documents) will be used to deposit the mortgage and then for repayment at the scheduled intervals in the future. It’s generally best practice to have the most recent six months of bank statements prepared but in most cases your last three statements will suffice.
Any additional assets and investments such as bonds, stocks, other securities or real estate should be disclosed as this will help increase your net worth and perhaps lower your interest rate.
Although your credit report will be automatically pulled by the lender, it’s beneficial for you to have a rough idea of where you stand. This will help determine your interest rate and homebuying budget. As well, help you mend any discrepancies that may appear.
As housing affordability increasingly becomes an issue, many first-time homebuyers in Canada receive funds from a family member for a down payment. A gift letter shows the lender that the funds received is a gift not a loan, and you are not required to pay it back.
First-time homebuyers in Canada are eligible to use money saved in their RRSP (Registered Retirement Savings Plan) for a down payment on their first home through the Home Buyer’s Plan. If you plan on using this, a withdrawal statement will be required by the lender.
If you sold an existing home to purchase another, then a copy of the Agreement of Purchase and Sale for the property that will be used for the down payment will be required by the lender.
If you plan on refinancing your existing mortgage, any lender will want to see a recent mortgage statement to help them with their debt servicing calculations.
Income generated by investment and rental properties will be added towards your yearly income earned. If you are collecting rent on any property, the lender will want to see any current rent or lease agreements.
If you have regular full-time, part-time or seasonal work then you are considered an employee and will be issued a T4 or T4A by your employer. If you are a commission-only or independent contractor, your employer will issue a T4A. Lenders use the information on a T4/T4A to validate the income that you claim on your mortgage application. For most mortgage applications, a borrower who is employed by a company will be required to present the lender with their T4 or T4A for the last two tax years.
The paystubs you provide in your mortgage application is verification of the income you earn at your current job. This is important as the bank wants to confirm you have sufficient income to cover the mortgage. If you work as a part-time, full-time or seasonal employee, you will likely be required to provide paystubs for the most recent two pay periods.
A letter of employment is a letter which states the type of employment you have (full-time, part-time or seasonal), your rate (hourly or salary) and your role and title at the company. Ensure it is written on company letterhead and signed by your employer. This will help lenders confirm that you do work at the place and with the job title that you wrote on your application.
The T1 General Tax Form indicates how much cumulative income you made for the previous tax year. If you are self employed or own a corporation, you will likely be asked for your T1 General tax forms for the most recent two tax years.
After successfully filing your taxes, the Canada Revenue Agency (CRA) will send you a Notice of Assessment (NOA). This will provide details on your reported income amounts and any outstanding taxes owing. Regardless of your income sources or type of employment, you will likely need to submit your NOA’s for the two most recent tax years.
If you are self-employed and have a corporation registered, then the Articles of Incorporation will be used by lenders to verify whether you have paid suppliers on time by running your business’ credit report. If you are a sole proprietor or simple partnership, then your business license will be required.
Legal address of the property including postal code.
If this is a new purchase, you will need to provide a copy of the MLS listing of the property you intend to purchase. Your real estate agent can provide this to you. It will be used to estimate property taxes, heating and utility costs, condo fees, etc.
If this is a new purchase, once the agreement has been signed, the bank will want to know the exact value of the home to determine the principal amount of the mortgage and identify the appropriate down payment required.
If you are doing a mortgage refinance, the property tax bill will help lenders ensure that there are no taxes owing on the property or they will pay off any outstanding property taxes from the mortgage refinance.
Whether you are newly purchasing a property or refinancing an existing one, the lender will want to know whether you own or partially own any additional properties.
The full physical address including postal code for all additional properties owned or partially owned will be required. This is because the lender will want to know how much of your assets are tied up in real estate.
The lender will require the most recent mortgage statement for any additional property that has a mortgage balance or HELOC (Home Equity Line of Credit) on the property. Lenders will use any mortgage and HELOC balances as part of their debt servicing calculations. They also want to verify that all of your mortgage payments are up to date.
If you are doing a mortgage refinance, the lender will want to see that there are no property taxes outstanding on any properties owned.
Depending on the type of mortgage, the application process involves a lot of documentation and can be lengthy and tedious. That’s why it pays to have a Mortgage Broker in your corner. An independent mortgage agent has access to all lenders (banks and private) and will help guide you make the best, most informed decision based on your individual financial status.
Everything Mortgages can help with all of your Pre-Approval, Home Purchase, Renewal/ Transfer and Refinancing needs. Depending on what we are helping you with, we may require all or some of the following documentation, but your Mortgage Broker will always ensure you have everything you need to succeed.
To best prepare yourself for what lies ahead talk to a Mortgage Broker today.