Documents

When looking for a home, getting a pre approval is a very important step.

The quality or thoroughness of a pre approval review can range from, at the low end, a client completing an online pre approval calculator to at the other end, having a lender review and approve an application as well as having your supporting documents (i.e. income verification) reviewed and accepted by your mortgage broker.

Buying a house and getting a mortgage is an large and important step in one’s life and the more detailed the pre approval review, the better the chances there will be no surprises that rise during the process.

Typically an underwriter at bank/lender will not review documents at the pre approval stage so working with a mortgage broker to secure a mortgage can be an extra line of defence as they can review your documents upfront and let you know if there will be any challenges. This review, in addition to the bank/lender’s review of the application.

I am routinely called by clients at the end of their financing condition period after making an offer, who are in distress as their bank is now not able to approve them, even after being pre approved with their bank originally.

Often in these cases, documents were not verified at time of pre approval. For example, a client that says at the time they earn $50,000 a year may be hourly, on contract, self employed, including their bonus, on probation, and so on. In all these examples the lender will not be using your current $50,000 and will be looking to a two year average of your taxable income or not able to use your income due to being on probation.

If your average income is lower, this can dramatically affect your pre approval amount. Or if your current year’s income is less then your previous’ year, a lender may only use the lower, most recent, amount.

So to avoid problems, having your documents reviewed upfront is crucial to assure an accurate pre approval. The best items to confirm upfront are income and down payment. These are the two most common areas where things can go wrong.

Below is a list of documents that should be reviewed upfront.

Income verification:

If you are salaried:

    • pay stub

For all other incomes that are not a base salary only:

    • a pay stub (if you have an employer)
    • a letter from your employer (if you have an employer)
    • your last two years Notice of Assessments, or
    • your last two years T1 Generals

Down payment verification:

If from the sale of a property:

    • the MLS listing
    • a mortgage statement
    • the sale agreement

If from savings:

    • 3 months of account statements showing the funds history

If from a gift:

    • nothing needed at the pre approval stage

If you feel you cannot provide any of these documents during the mortgage process, it is better to let your mortgage broker know early in the process. Knowing what is needed upfront will also allow you more time, while home hunting, to be collecting the documents.

Here are some example documents that a lender typically requires once you have made an offer on a property.

Income verification:

If you have an employer and you have an annual salary:

From your income verification the lenderʼs goal is to see that you are currently employed, in a permanent position, your income does not fluctuate between pay periods and that there are deductions at the source.

Verification is to be provided by way of:

      • a pay stub dated no earlier then 60 days from the current date and,
      • a signed letter of employment dated no earlier then 60 days from the current date and,
      • T4 for the last two years or,
      • Notice of Assessment for the last two years

Please note, lenders are not able to use income from any applicant on probation.

If you have an employer and you are non salaried a (i.e. hourly employment):

From your income verification the lenderʼs goal is to find your average taxable income for the last two tax years. In addition, a lender will need to see that you are currently employed, in a permanent position and that you have deductions at the source.

Verification is to be provided by way of: 

        • a pay stub dated no earlier then 60 days from the current date and,
        • a signed letter of employment dated no earlier then 60 days from the current date and,
        • T4 for the last two years or,
        • Notice of Assessment for the last two years

Please note, lenders are not able to use income from any applicant on probation.

If you are self-employed:

From your income verification the lenderʼs goal is to see that you you do not have any income taxes in arrears, to see the source(s) of the income and your average taxable income form your last two tax years. Please note, if your most recent tax yearʼs income was lower then the previous year, they will use the lower income number.

Self employed applicants will verify their income by providing the lender with:

      • Notice of Assessment for the last two years and,
      • T1 General (all pages) for the last two years

The lender may also require evidence of at least two years self-employment by one of the following:

      • Business license (Sole Proprietorship or Partnership only) or,
      • Canada Revenue Agencyʼs Notice of Return Adjustment/Summary or a GST return (Sole Proprietorship or Partnership only) or,
      • T1 Generals with Statement of Business Activities attached for a minimum of 2 years (Sole Proprietorship or Partnership only) or,
      • Articles of Incorporation

Please note, lenders may also request two years of business financials if incorporated.

Down payment verification:

If from personal resources:

You are to provide verification, satisfactory to the lender, that the down payment is available from your own resources.

Verification is to be provided by way of:

      • 90 days (3 months) of account history

Please note:

      • if the funds are held in one or more accounts, or funds moved to different accounts durning the 90 days, you must provide the most recent account history for each account
      • the statement or a combination of statements must show your name, the financial institutions name, the account number and the 90 days history
      • lenders will not accept documents with information blacked out/altered

If from a business:

You are to provide verification, satisfactory to the lender, that the down payment is available from the business.

Verification is to be provided by way of:

      • 90 days (3 months) of business account history
      • confirmation that you own the business or are a shareholder
      • if incorporated, you must provide your Articles of Incorporation and if self employed, you must provide your Master Business License

Please note:

      • if the funds are held in one or more accounts, or funds moved to different accounts durning the 90 days, you must provide the most recent account history for each account
      • the statement or a combination of statements must show your name, the financial institutions name, the account number and the 90 days history
      • lenders will not accept documents with information blacked out/altered
      • if the business has multiple owners or shareholders, they may ask for additional information

If from a gift:

You are to provide verification, satisfactory to the lender, that the down payment is available as a gift from an immediate relative. Immediate relatives are defined as parent, child, sibling, grandparent, or guardian.

Verification is to be provided by way of:

      • a gift letter and,
      • 30 days of bank account history confirming you have received the funds from the gift provider

Please note:

      • you and the gift provider must complete the lenderʼs gift letter form
      • self-made gift letters will not be accepted

If from the sale of a property:

You are to provide the signed and accepted sale agreement for the property sold, and confirmation of the outstanding balances of any debts secured by the property being sold.

Verification is to be provided for property being sold by way of:

      • current mortgage statement
      • sale agreement
      • MLS listing

Closing costs:

You are to provide verification that you have available from your own resources, in addition to the down payment, 1.50% of the purchase price to cover closing costs.

Verification is to be provided by way of:

    • 3 months of account history

Please note:

    • if the funds are held in one or more accounts, or funds moved to different accounts durning the 90 days, you must provide the most recent account history for each account
    • the statement or a combination of statements must show your name, the financial institutions name, the account number and the 90 days history
    • lenders will not accept documents with information blacked out/altered4) Void cheque or PAD

Void Cheque or pre authorized debit form

Photo ID

Here are some example documents that a lender typically requires for a refinance.

Income verification:

Income – If you have an employer and you have an annual salary:

From your income verification the lender’s goal is to see that you are currently employed, in a permanent position, your income does not fluctuate between pay periods and that you have deductions at the source.

Verification is to be provided by way of:

      • a recent pay stub, as well as
      • a signed letter of employment.

Documents must be dated no earlier then 60 days from the current date.

Income – If you have an employer and you are non-salaried (i.e. hourly employment) or salary plus bonus:

From your income verification the lender’s goal is to find your average taxable income for the last two tax years. In addition, a lender will need to see that you are currently employed, in a permanent position and that you have deductions at the source.

Verification is to be provided by way of:

      • a recent pay stub, as well as
      • a signed letter of employment.

Documents must be dated no earlier then 60 days from the current date.

In addition, as the lender will be using the average income from your last two years of employment, they will require:

      • T4 for the last two years and/or,
      • Notice of Assessment for the last two years

Income – If you are self-employed:

From your income verification the lender’s goal is to see that you you do not have any income taxes in arrears, to see the source(s) of the income and your average taxable income from your last two tax years. Please note, if your most recent tax year’s income was lower then the previous year, they will use the lower income number.

Self employed applicants will verify their income by providing the lender with:

      • Notices of Assessment for the last two years
      • T1 Generals for the last two years

Photo ID

Void cheque or pre authorized debit form

Mortgage statement

Recent property tax bill

Proof of fire insurance

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