Documents You Will Need When Applying For A Mortgage
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You're thinking about buying a home, which means you'll most likely be in the market for a mortgage. As with any large financial transaction, there is a lot of paperwork involved. Below is a list of the standard documentation you'll need to provide. After your application has been filled out, the potential lender will set out to verify all of the information provided.
It's super important to be current and precise with information you provide, as any discrepancies between what you provide and actual document verification can thwart your approval or at the very least, stall the approval process. Below are items that are normally required, although there could be additional items required not listed, depending on the lending institution.
Who Are You?
You'll need to provide some basic identification, including your Social Insurance Number and a form of Government issued ID with a current address.
How Much Do You Have and How Much Do You Owe?
The lender will want to ensure you can afford to pay back your mortgage and they'll want to see that your debt-to-income ratio is in line with their policies. They'll say yay or nay after having a look at a summary of your assets, including cash in accounts, investment balances, RRSP's, any vehicles you own outright, other property you might have or anything else of notable value that you might own.
On the flip side, they'll need to compare the above value to any debt you've got. This includes balances on credit cards, loans, other mortgages or any other notable things that you owe money to. They want to be sure that your cash flow can support your mortgage payments, and in the event that ever changes, they have some assets to go after if you default on payment.
Proof of Income
For employees of a company, a recent pay stub and record of employment should suffice. This can be requested from the Human Resources or the payroll department and should include the date you started employment with the company, your annual salary or hourly wage, how many hours you work per week ((guaranteed hours) and your title and position.
For self-employed individuals, things get a little trickier.
If you work for yourself, tax returns are usually the go to for proof of income. Be prepared to produce tax returns from the past two (most recent) years, along with accompanying "Notice of Assessments" from Canada Revenue for the same time period. There are also a few other avenues that might be sufficient, such as profit and loss statements, bank statements, invoices and proof of payment from clients or other financial statements including a pension, social security, death benefit or investment documents.
The easiest and most accepted information is from tax returns, but speak to a mortgage advisor about how to work around things if you don't have access to that information. Depending on the lender, the other items above might get you approved.
Verification of Your Down Payment
The lender will need to know the source of your down payment, which can be verified by any of the following means:
- If you've stashed away your hard earned cash over time and are using savings from your own bank account, you'll need to provide the three most recent months of bank statements. This way, they can track that you've had the money in the account for some time and haven't transferred it in the past week or month. The statements must include your name and account number.
- If the down payment is coming out of an investment, including an RSP, GIC, stock or bonds, you'll need to pony up the most recent quarterly account statement or a 90 day history.
- If your family is generous and has the means to gift a down payment to you, you really need to cook them dinner and thank them- A LOT! Outside of that, the relative will need to write a “gift letter”, which is a standard template and can be provided by a mortgage broker, along with proof that the funds have been deposited into your bank account.
- Lastly, If the down payment is from the sale of an existing property, which is very common, a purchase and sale agreement and current mortgage statement will be requested.
Not Done Yet!
You've got all your ducks in a row with the paperwork outlined above, but the fun doesn't stop there! You'll also need a few more things to complete the process, which are:
- The Purchase and Sale Agreement and MLS listing for the property you're buying (generally provided by your Realtor).
- Copies of any waivers and amendments to the agreement.
- A copy of deposit cheque for the home.
- A void cheque for the account that mortgage payments will be taken from.
- The name and contact information of the lawyer handling the transaction
The Finish Line!
You've pretty much done your part if you complete the above asks. The rest is a waiting game to see which lenders will approve you and considerations of various terms you want to lock into once you've decided who is getting your money! With various mortgage types and terms available and other areas of the contract like pre-payment privileges, etc, it's best to sit down with a mortgage advisor to do a dry run through the process and options first. After all, buying a home is one of the biggest purchases of your lifetime! Being well prepared and arming yourself with as much knowledge as possible will help empower your decision making and alleviate a lot of stress!