“Bulletproof Mortgage Application Checklist”
The process of applying for a mortgage can be daunting to many first time home-buyers. Filling out an application is just the first step among a few.
Often, the most tedious aspect involves gathering requested documentation in a timely fashion.
While each lender has its own criteria used to determine your eligibility (often referred to as mortgage underwriting), there’s usually a standard range of lending support documentation requested across the residential mortgage sphere.
The following is a list of the most common:
Document #1: A letter of employment from your current employer. This letter should be written on company letter head, dated within the past 30-60 days; include your annual salary (yearly bonuses if any); job title and telephone contact of the human resource personnel.
If you have more than one employer, and each represents a balanced share of your overall salary, then letters from both employers will be necessary.
Bare in mind also that most lenders do require a minimum of 3 years employment history. If you have been with your current employer less than that period, you will need to supply information about your former employment status.
As well, if you are currently within a probationary period, some lenders (but not all) might find this problematic.
Document #2: Most lenders will also require recent copies of your pay-stubs covering the least 3 months. If pay-stubs are not supplied, then a print out of actual deposits will be needed.
Document #3: Request a copy of your T4 showing earnings for the past 2-3 years from your current employer. A T4, or a Statement of Remuneration Paid, is an information slip prepared and issued by your employer to tell you and the Canada Revenue Agency (CRA) how much employment income you were paid during a tax year and the amount of income tax that was deducted.
Document #4: Gather the last 2-3 years of your Notice of Assessment (NOA). This form is issued by the Canada Revenue Agency (CRA) annually to all taxpayers after returns have been processed.
It states the amount of taxes to be paid or refunded and the net income earned for a specific year.
This is one of the most important documents needed. If there’s a significant difference in earnings over the last 2-3 years, an average is often used to determine your actual annual income.
Document #5: Proof of Down payment. Lenders require proof of all Down-payment sources, showing a gradual buildup over at least a 90 day period.
A print out of each savings or investment account showing 3 months activity (deposits, withdrawals, interests earned etc.) is a basic requirement.
The print out must include your name, the financial institutions and the respective account numbers for each down payment source described in your application.
Document # 6: Supply a list of the value of assets owned. The more assets you possess, the higher is your overall net worth. A high net-worth borrower is seen as less of a credit risk to lenders.
A key thing to keep in mind here is that your net worth is determined by your assets, not necessarily your income.
Such assets could include vehicles owned (or financed), the value of current furnishings & jewelry (often described as “goods in kind”), the cash surrender value of a life insurance policy, artwork or the value of current investments not used towards your down payment.
Document #7: A copy of the executed Agreement of Purchase & Sale. An executed sales agreement is a real estate
document that captures the details of a purchase or sale between buyers and sellers.
This document is available from your Realtor and shows the details of the final purchase including the MLS listing, all schedules, waivers and outstanding conditions that have been met.
In closing, the above list is certainly not an exhaustive one. Some lenders require less in the way of documentation, others require more. Indeed the range of mortgage underwriting criteria in the marketplace varies quite a bit.
As such, one of my key roles as a mortgage broker is to help match borrowers with lenders whose lending criteria is the best fit to that individual borrower’s profile.
I usually encourage my clients to begin obtaining documentation right from the beginning. This strategy helps to minimize delays and allows us to deal with the sometimes unexpected lender requests in a fairly timely fashion.
As always, do not hesitate to email or call me with any of your mortgage financing questions or concerns.
