The Mortgage: What Documents Do You Need To Apply For One?

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Found a home you love? Ready to start the mortgage process? Awesome! What’s next?

Paperwork! One of the first things lenders will ask of you is a list of documents – so having this organized beforehand is essential. These documents are intended to provide information about your financial stability and other key factors to help lenders determine if you’re eligible for a mortgage. To make things easier, here’s an overview of everything you need to be prepared for the application process:

– Photo Identification

Lenders will require a copy of photo ID to verify your identity. This includes a Canadian driver’s license, passport and health card.

– Job Letter

This letter is provided by your employer and explains the job position, length of employment and income amount. It gives lenders better insight into your financial situation, job stability and whether or not you’ll be able to afford your mortgage.

– T4 & T4A

A T4 verifies employment income such as salary or hourly income and is given to individuals to file their tax return. Your T4 also specifies the amount of income earned in a one year period, as well as any earnings deductions. Borrowers are required to provide T4s for the last two years with their application

A T4A is needed if you worked with anyone else outside of your primary employer. It captures any income that is not captured on your T4 from other sources including self-employment commissions, RESP educational assistance payments, or if you’re a student, any scholarship or bursary income received during your enrollment. To receive this document, you can visit the Canada Revenue Agency (CRA) website.

– T1 General Tax Return

If you have a commission-based income, a T1 General is needed. Your T1 General is a summary of your income, deductions and taxes owed, and/or if you’re eligible for a refund. Lenders will request to see a copy of your T1 General for the two most recent years. You can get your T1 General from whoever submits your tax return. If you file your own taxes through software, you can simply download your T1 General.

– Notice of Assessment (NOA)

This document is issued by the federal government when an individual’s personal tax return has been completed and filed. An NOA shows a breakdown of your income from the past year, the date in which your tax return was reviewed, the details of how much you owe or the amount of your refund. Your NOA is either delivered to you by mail or you can access it through the CRA website after creating an account.

– Pay Stub

Lenders will request a pay stub to validate your income and confirm that your job letter and application are aligned. Pay stubs are provided by your employer at every pay period, and can come in the form of a cheque, direct deposit or other methods of payment. They’re often delivered via mail, otherwise you can reach out to the HR or Accounting department.

– Bank Statement

This shows a balance in your bank account where your income is deposited and expenses are paid. Typically, a lender will look at the last three months of your bank statements to see your average salary, down payment, and any major expenses you may have. You can access your bank statements through online banking and download them in the form of a PDF. If you don’t use online banking, you can go to your nearest branch or request statements in the mail.

– Gift Letter

Approximately 30% of Canadian home buyers get help from a family member when making a down payment. If you’re one of them, you’ll need to provide your lender with a gift letter. This document outlines who your family member is, the amount they’re giving you and an explanation that the money is being used for your home purchase. This letter also validates that this gift isn’t a loan and you are not obligated to pay this money back.

A proper gift letter should include:

The gifter’s name, address and phone number
The gifter’s relationship to the recipient
The dollar amount of the gift
The date the funds were transferred
A statement from the gifter that no repayment is expected
The gifter’s signature
The address of the home being purchased

Self-employed?

– Financial Statements

These statements give lenders an overview of a business’ financial data including balance sheets, income statements, the Statement of Retained Earnings, Statement of Changes in Financial Position (SCFP) and the Notes to the Financial Statements. It presents the company’s current financial standing as well as an overview of its profitability in the short and long term.

– Master Business License

If you are a sole proprietor or a business owner, this document may be requested by your lender as proof that you own the respective business. It validates that the business is actively operating and is registered in your province. If you don’t have your Master Business License on hand, you can reach out to your lawyer for a copy.

– Business Cheque

This is a cheque that is associated with your business bank account and is used to further validate your self-employment status. If you do not have business cheques on hand, you can order them directly through your bank.

What if I’m refinancing or switching my mortgage?

– Current Mortgage Statement

This statement is supplied by your lender and verifies the financial standing of your current mortgage. It includes the balance of the mortgage, the interest rate and the time remaining on your contract. Future lenders need it to know the remaining balance on your mortgage in order to determine the principal that must be repaid when you switch or refinance.

– Property Tax Statement

The municipal tax authority will provide this document to you in the area where the property is located. It overviews the amount of taxes that are payable by the homeowner and is obtained during a refinance or a switch to ensure that property tax payments are up to date.

– Homeowners Insurance Policy

A homeowners insurance policy is required by most lenders in a home purchase. It covers losses caused by fire, vandalism, water damage and other potential risks. When refinancing or switching your mortgage, you’ll need to provide proof of your insurance policy to verify that your home has current and sufficient coverage.