Whether you are on the hunt for a new house, purchased a new property, or are refinancing your existing mortgage one of the most daunting steps can be finding the mortgage that is right for you. It goes beyond simply choosing between variable or fixed rates and the term of the mortgage loan. A mortgage is a long-term commitment that is a major decision in most people’s lives. Therefore, you want to make sure that you are getting it right!
To help you in this task, we have compiled the mortgage document checklist located below for your reference so that you can be prepared before applying for a mortgage. The application process itself can often be lengthy, so please note that while this list is extensive, it is most certainly not exhaustive. Different lenders have different requirements, so you should check to see if your mortgage broker specialist can provide you and take you through a unique mortgage application based on your financial situation and mortgage loan needs. Once your application is filled out your mortgage broker will help tailor it to the specific bank or banks that they will be submitting your application to.
As a starting point though, we have segmented the different mortgage paperwork requirements and document requirement into (a) employment verification, (b) personal finance, (c) down payment, (d) details of the property, and (e) other properties owned.
Employment and Income Verification
1) Recent Paystubs
The paystubs that you provide to the bank serve as verification for the income that you are earning at your current job. This is important for the bank to validate your income generation capabilities and whether they are sufficient to service the mortgage on a timely basis. You will most likely be required to provide paystub for the most recent 2 pay periods if you work as a part-time, full-time, or seasonal employee.
2) T1 General tax form
In Canada, the T1 tax form indicates how much cumulative income the prospective borrower made in the previous year to establish their creditworthiness. If you are self employed or own a corporation, you will likely be asked for your T1 General tax forms to most recent 2 tax years.
3) Notice of Assessment
At the conclusion of each successful tax filing, the Canada Revenue Agency (CRA) will provide a Notice of Assessment (NOA) document that details any outstanding taxes owed. To lenders, this is also an important consideration as it factors into their debt to income ratio calculations. Regardless of your income sources or types of employment, you will likely need to submit your NOA’s for the 2 most recent tax years.
4) Letter of Employment
The letter of employment needs to be signed and verified by a representative of the company. This helps lenders confirm that you really work at the place and with the job title that you wrote on the application. For your letter of employment make sure that it states how long you have been at the current company, whether you are a permanent or temporary or probationary employee, whether you are full-time, part-time, or seasonal, your hourly or annual salary rate, if you have guaranteed hours in the event that you are part-time or hourly, and what your role and title is at the company. Make sure that it is on company letterhead, signed by the manager or HR person writing you the letter, and ensure that is not older than 30 days old..
5) T4 and T4A
If you are a full-time, part-time, or seasonal employee your employer will issue you a T4 every year that will show lenders the breakdown in your annual pay, tax deductions, pension and other government program deductions, and more. If you are a commission only employee, your employer will be issuing you a T4A. Lenders use this info to validate the income that you claim to earn 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 most recent 2 tax years.
6) Bonus: Articles of Incorporation or Business Licence
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’s credit report. If you are a sole proprietor or simple partnership, then your business licence will be required.
1) Bank Account Information
The bank account documents (with transit number) are used by lenders to deposit the mortgage and then for repayment at the scheduled periods. It is best to have the most recent 6 months of bank statements prepared and ready to submit to your mortgage broker if needed, though in many cases the last 3 months of bank statements will suffice.
2) List of Assets and Investments
If you have investments held in the stock or bond markets, prior assets in the real estate market and/or other securities, these are beneficial for the lender to establish your net worth. This can lower your interest rate and also serve as support in case the income from your paystubs is just under the required threshold.
3) Credit Report
While the lender will pull this for you regardless, it is helpful to have an idea of what your credit report looks like prior to seeking a mortgage. This will help you budget the anticipated mortgage rate and also help you plan the valuation of the house you should buy. If you find any discrepancies on your credit report, which happen about 25% of the time, you may have time to fix these inaccuracies with the proper Equifax or TransUnion credit bureaus if you check your credit ahead of time.
4) Pre-approval letter
It is generally best practice to get pre-approved for a mortgage prior to embarking on the mortgage application process. If you have a pre-approval letter from the bank, take it with you when applying.
1) Savings and investments statement for the past 90 days
If you have accumulated savings from investments that were made in the previous 90 days, these need to be calculated and written into a document that is provided to the lender.
2) Agreement of Purchase and Sale of your existing property
In the event that you are buying a new house by selling off your old one, 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 lenders.
3) RRSP Withdrawals (HBP)
In Canada, first-time homebuyers are eligible to use money saved in their RRSPs to make down payments via the First-Time Home Buyer’s Plan. If you intend on using this, then this needs to be documented and provided to the lender as well.
4) Gift Letter
In case someone else (such as an immediate family member) is helping you make the down payment, then the bank would need a gift letter signed by them confirming that the payment is made as a gift and it is not intended to be repaid.
Details of the Property
1) Real Estate Listing (MLS Listing – if this is a newly purchased property)
The real estate listing can be provided by the agent and is used for items such as property tax estimates, heating and utility cost estimates, condo fees etc., lot information, and more.
2) Accepted Purchase and Sale Agreement (if this is a newly purchased property)
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.
3) Address of the property
Legal address of the property including postal code.
4) Recent mortgage statement(s) (if this is for a mortgage refinance)
Lenders will use this to confirm the remaining balance of your current mortgage in addition to ensuring that your mortgage is paid and in good standing. You will need to provide the mortgage statements for any first mortgage, second mortgage, third mortgage, and Home Equity Line of Credit (HELOC) that exists on the property.
5) Final Property Tax Bill (if this is for a mortgage refinance)
This is to help lenders ensure that no taxes are outstanding on the property or pay off any outstanding property taxes from the mortgage refinance amount.
Other Properties Owned
1) Full physical address of all additional properties owned or partially owned by the borrower
The lender would like to understand how much of the borrower’s assets and liabilities are tied up in real estate.
2) Recent mortgage statement(s)
Most recent mortgage statements for any property that is owned by the borrower that has a mortgage balance or HELOC (home equity line of credit) secured by 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.
3) Final Property Tax Bill (if this is for a mortgage refinance)
Lenders will want to see that your property taxes are up to date, otherwise they may pay the property tax arrears out from the mortgage advance.
4) Rent or Lease Agreements
Many lenders will consider income generated by investment and rental properties towards your yearly income earned and include it in your overall debt servicing ratios. If this is the case, then the lenders will require to see any rent or lease agreements if you are collecting rent on those properties.
The above is a list of the majority of items that are part of the standard mortgage checklist that you should start preparing prior to commencing your mortgage approval and closing process. As mentioned above, individual banks and lenders can have requirements over and above what is listed here, but to make sure that you get ball rolling on the mortgage loan as soon as possible, this list should enable you to start hunting around for the best possible deal. Happy (mortgage) shopping!