So you’ve decided to buy a property, refinance, or just renew. Congrats!
Helping yourself make this process stress-free comes when you are prepared and using an experienced agent to help you through it all. Being prepared will make things easy for yourself, and ultimately the lender and/or broker you may work with. If you have any questions about this guide or applying for a mortgage, I am just a call away.
Documentation is how lenders assess their interest to provide a mortgage, what type, size, and at what rate. Being prepared means having all the documents that will be needed UPFRONT. It is helpful to keep a folder on your computer, and update it as needed. This will make things easier.
Some types of mortgages and associated lenders will require more or less or different documents to satisfy their interest to lend to you. Below is a comprehensive and detailed typical set of needed documents that you should have prepared, ideally at the beginning of seeking a mortgage or even a pre-approval. For example, for prime lenders an Appraisal and your Credit, Income, and Down Payment are the top 4 documents needed.
Not only will this prevent any issues down the road, but will give you the best indicator of what is really possible, not just an estimate. Failing this, you could make this process drawn out, or worse, lose the home you put an offer on, including the deposit. If you just planned better……..
Providing everything upfront also allows the lender to provide a potential commitment back to you much quicker, and could be the difference in you getting that dream home or losing it to the other person who has their finances in order.
Using the list below will aid you in collecting what is needed to make this smooth for you.
An appraisal is required for most mortgages and is sometimes done internal to the lender and sometimes is needed to be arranged by your broker. Costs average $300 to $600+ depending on where and what type of appraisal is needed. You do not have to do this, it will be instructed by the lender and/or broker. Some are done virtually and some require an approved appraiser to visit the property. Often, this critical step is done at the beginning, before anything else is done to assess what is possible, but can also be done throughout the mortgage process, depending on the situation.
1. Identification. Two pieces of ID for each applicant
Driver’s License (front and back)
Passport or Social Insurance Number
Note: other forms of ID are approved if the above are not available.
2. If Purchasing:
Proof of Down Payment via your bank statements showing available funds.
Proof of Closing Costs via your bank statements showing available funds. Typically amounts to 1.5% of the purchase property but varies based on lender criteria.
MLS Listing (obtained from your realtor showing picture, full listing, taxes, age, lot/plot)
Agreement of Purchase and Sale. (this document is the agreement you signed with the seller and the real estate agent to purchase this property).
Note 1: If buying a condo or condo townhome that has fees, you will also need to get a copy (this can take a while) from your Property Manager that shows proof of maintenance fees, amount, and what is included within the fees (heat, water, etc.)
Note #2: A Sale Agreement with all appendices, plus the Trust Ledger may be needed.
(only needed if using the proceeds from your current home to afford your new home).
Trust Ledgers are obtained from your Solicitor and is usually not available until much closer to date of closing. It is important to still showcase what you will net out from your sale to be used so this amount can be used for qualification purposes.
3. If Refinancing:
Current Mortgage Statement
Current Tax Statement (if refinancing or renewing, or if buying additional properties. Sometimes this is included in the mortgage statement)
4. Proof of Income and Employment:
Letter of Employment
2 recent Paystubs
Most recent 2 years of T1 Generals
Most recent 2 years of T4
Most recent 2 years of Notice of Assessments
Article of Incorporation or Master/Business License
Most recent 2 years of T1 Generals with Business Activity
Most recent 2 years of Notice of Assessments
3-6 month bank statements (if self-employed less than 2 years)
Note: Other documents may be needed depending on your situation or the lender’s requirements.
Copy of a VOID Cheque (for your solicitor to ensure monies are withdrawn and paid to the lender from this account). This is typically given to the solicitor, not your broker.
Copy of your Home Insurance Policy. Either a new policy or an updated “insurance binder” provided by your insurance company when adjusting it. This is typically something you provide to your solicitor, not your broker.
If you have been Bankrupt, and have been discharged, most will want that to have happened 24 months ago and will require a discharge statement
If divorced, your separation agreement with all adjustments will be needed. It needs to prove if you, as the applicant, owe any form of support to either your ex-partner or dependents.
To learn more about the details of certain documents, keep on reading below.
A Special Note about Down Payment (if purchasing)
Sometimes you don't have enough or someone you know has given you an amazing gift to help make being a homeowner possible. For most lenders, there must be proof of the amount you are personally contributing from your own funds. There are minimums you have to adhere to in order to secure a mortgage. This proof is provided through your 90-day history of the bank statements showing where the funds have been held for that period of time.
If you don’t have enough and are using a gift to afford this down payment, a Gift Letter is needed. (often lenders have specific forms they want you to fill) The Gift letter needs to be executed by both parties, the borrower and the donor. This letter is to confirm the following points: The proceeds are a true gift and never have to be repaid. The donor of the gift is an immediate relative and no part of the gift is being provided by a third party having any interest (direct or indirect) in the sale of the property. Confirmation of the gift is required in the borrower’s possession at least 15 days prior to the closing date. Verification must be made in the form of a bank account statement history confirming deposit of the gift funds to the borrower's bank account.
All forms of allowable contribution must be shown by way of you providing 90-days bank statement history from the date of deposit into your account(s) or date of application. (some lenders may allow other timeframes)
If there is a shortfall, you can use the deposit you made on the purchase (if purchasing) and must then provide:
Copy of the draft cheque/payment made
Realty receipt from the Realty Company
A Special Note about Closing Costs: (if purchasing)
Depending on the situation, your closing costs are typically 1.5% of the purchase price, but can be upwards of 4.5% depending on location and other factors. Items included in this amount may be, but are not limited to:
Land Transfer Tax. Provincial and Municipal, where applicable.
Legal Fees and Disbursements
Mortgage Default insurance, plus PST on it.
Prepaid Utility Bills (from previous owner)
Property Taxes (typically 0.83% of house value, in Toronto)
A Special Note about Proof of Employment
Letter of Employment: the Lender requires written confirmation of current and ongoing employment in the form of a letter dated within 30 days of the application date. Letter must be signed and typed on company letterhead and must reflect the following:
Start date, minimum 1 year or previous employment is required
Hourly rate with the number of hours or annual base salary,
Employment status, i.e. full time, contract, etc.,
Other benefits if applicable
Note #1: If you are self-employed, unemployed, or retired, this does apply to you. You have other documents you need to provide shown below in “Proof of Income”
Note #2: If salary and/or guaranteed number of hours cannot be confirmed, the lender will typically reserves the right to request additional documentation and/or re-qualify the application. Full Time vs Part Time work - Lenders will not use Part-time work that you have been at for less than 2 years.
Note #3: Proof you are not on probation. Ensure that the letter states so (ideally) or confirm/negotiate the lack of probation.
Note #4: with Covid-19 and related, some Lenders will be wanting to verify your employment within as little as 5 days prior to closing. Ensure you are in good standing.
I help make this easy. As you can see, getting a mortgage requires a lot to ensure you get what you need, the way you need it, and get approved with so many moving parts. That is why working with a trusted and experienced broker will make all the difference. You deserve better. Give me a call to discuss your unique situation.