Mortgages can sometimes feel like endless stacks of paperwork but being prepared in advance can save you time and stress! Getting your mortgage pre-approved is part of this prep process and will make things easy in the long run.
To get pre-approved, the lender must have taken you on as a client and reviewed all your documents before you begin house-hunting. It is important to ensure you have your pre-approval certificate before moving ahead and your pre-approval agreement in writing. This should include the pre-approved mortgage amount, the mortgage term, interest rate, payment information and the expiry for the pre-approval. Typically, they are valid for up to 120 days.
To prepare for the mortgage pre-approval process, there are a few must-have documents that you will need to organize and have available prior to submission.
Letter of Employment: One of the key aspects of financing approval is employment stability. Lenders want to see a letter from your employer (on company letterhead) that details when you started working at this company, how much you make per hour or your annual salary, your guaranteed hours per week, and any probation if you are new. This can be done by your direct manager or the company HR department – they will be used to this type of request.
Previous Two Pay Stubs: In addition to the employment letter, you must also have your previous two pay stubs. These must indicate the company name, your name, and all tax deductions.
Supporting Documents for Additional Income: If you have any other income, such as child support, long-term disability, EI, part-time income, etc., the lender will want to see all supporting documentation.
NOTE: If you are divorced or separated and paying child support, it is important to also bring your finalized separation or divorce agreement. In some cases, they may request a statutory declaration from your lawyer.
Notice of Assessment from Canada Revenue Agency: Lenders will also want to see your tax assessment for the previous year. If you do not have a copy, you can request one from the CA by mail (4-6 weeks) or you can log in to your online CRA account to access it.
Your Previous Years T4: Along with your tax filing and assessment notice, lenders will also want to see your previous years’ T4 slip to confirm income.
3-Month (90-day) Bank Account History: Lastly, it is important for lenders to see 90 days history of bank statements for any funds that you are using towards the down payment. As
saving up for a down payment takes time, there should be no issues providing these documents. If you received the money from the sale of a house or car, or as a gift from your family, you would need proof of that in the form of sales documents or a letter.
The above documents are required for any potential buyer who is a typical, full-time employee.
But what if you only work part-time? Or maybe you are self-employed? Here is what you will need:
Part-Time Employee
You will still require all the above documents (letter of employment, previous pay stubs, supporting documents for any additional income and 90 days of bank history).
However, the difference between a full-time employee and a part-time employee, is that if you only work part-time, you will need to supply THREE years’ worth of Notice of Assessments, versus just one. You will also need to have been working for at least two years in the same job to use part-time income.
If you have both a full-time and a part-time job, you can use that income too, assuming it has been at least two years.
Self-Employed
If you are self-employed, the requirements for documents to lenders are slightly different. You will need to provide them:
3-Month (90 day) Bank Account History: Lenders need to see 90 days history of bank statements for any funds that you are using towards the down payment.
T1 Generals: Also known as the Income Tax and Benefit Return
Statement of Business Activities: This is used to illustrate the business income versus expenses and should include financial statements for your business.
Notice of Assessment from Canada Revenue Agency: Similarly, to part-time income, if you are self-employed, you will also need to provide the previous three years of assessments.
If Incorporated: You will need to supply your incorporation license and articles of incorporation.
When it comes to mortgages, preparation is key. By having pre-approval in hand, it can prevent any delays or issues with subject-to-financing clauses in the mortgage agreement. While you can walk into a bank, fill in an application and get a rate for a potential mortgage, this is just a ‘rate hold’ meaning it is a quote on the rate so you can qualify for the same rate later. This is not a pre-approval and does not guarantee financing.
To save yourself the headache down the line, contact a Dominion Lending Centres mortgage broker today to start the pre-approval process! Plus, our services are free to you. Why wait? Get fully pre-approved today to make closing the deal that much faster when you do find that perfect home.
Source: Our House Blog – https://dominionlending.ca/mortgage-tips/process-in-the-paperwork