Documents to Prepare Before Visiting your Mortgage Broker
In order to save time and ensure your first interview with a mortgage professional, it is highly recommended to prepare your documentations to ensure the accuracy of the information you will be providing. What this means is almost every personal information declared to the lenders will require supporting documents.
For example, lenders may need to verify applicant's declared income, address of residence, purchase contracts, net worth, properties owned, property taxes and many other documents. Preparing majority of the documents during your first visit to your broker will ensure a smoother transaction for you and the lenders. The critical documents needed when your broker submits the application to the lenders are Income verification documents, purchase contract (if purchasing a property) and proof of down payment.
Income Confirmation Documents
Salaried or Hourly Income
- Letter (with proper letterhead) from Employer confirming pay rate, job status and time of employment
- Most recent paystubs where the information matches the Employment Letter
- Lenders may request pay deposits confirmation into the bank account
Part Time Income / Seasonal Income
- Lenders will generally request to see consistency of the income for the past 2 years by presenting applicant's last two years T4. They will then justify the income by using the lower of 2 year average or most recent income reporting on the T4.
Self Employment / Contract / Commissioned Income
- Self Employed, Contract Employee and Commissioned Income earners are generally viewed as similar in nature of income, therefore lenders will request the following documents. The income used is based on the lower of most recent year or 2 year average of Line 150 on the tax returns.
1) Most recent 2 years Notice of Assessments (Personal)
2) Last 2 years T1 Generals (Personal)
3) Last 2 years Company Financial Statements (if InCorporated)
* Note that some lenders will review the company financial statements to see if there are available funds that can be drawn from the business as income.
Down payment Confirmation
Traditional Down payment for Insured Mortgages
- For CMHC, Genworth Financial and Canada Guaranty insured mortgages, mortgage applicants are required to produce most recent 90 days of the transaction history for the bank deposit account where the down payment is being debited. Be prepared to proof the source of deposited funds as some lenders may require on a case by case basis. Lenders are required to practice due diligence on Canada's Anti Money-Laundering and Anti-Terrorist financing guidelines.
- For purchase price of $500,000 or less, the minimum down payment requirement is 5% and for any purchases over $500,000, the minimum for the first $500,000 is 5% and 10% for the remaining portion.
Down payment for Un-Insured / Conventional Mortgages
- Major Canadian Banks do not require mortgage insurance when applicants inject 20% or more towards the down payment of the purchase or if a homeowner is refinancing up to 80% of the value of the property.
- applicants do require to present most recent 30 days of the transaction history for the bank deposit account where the down payment is being debited.
Gifted Down payment
- Down payment can be gifted either through gifted equity or a straight gift from an immediate family member. It cannot be a gift from an extended family. Different banks and lenders have their own gifted funds guidelines and gift letter template. Consult with your mortgage professional for more details.
- Gifted equity applies to a purchase of property from an immediate family member where the down payment is gifted through the equity. Therefore, there is no transfer of physical funds in the transaction.
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