In the previous article, I had discussed the value and importance of a mortgage pre-approval. Today I’d like to provide some information on the documentation lenders will be looking for at that initial interview.
Firstly, and most importantly, income confirmation. The exact form of confirming paperwork will depend on a client source of income. The most common documents are of course a current paystub and supporting letter of employment. The letter should indicate rate of pay (salary or hourly earnings), the client’s position or job title, how long the client has been employed and status as either full or part time. This type of income confirmation is often the easiest for clients to provide, however, if there is any additional income such as tips, commissions, pensions, bonuses etc, clients need to also bring copies of the last 2 years notice of assessment (NOA) from Canada Revenue Agency. These are the printed forms that are sent out after income taxes are filed each year. A two year average earnings is used for income qualifying. The only exception to this form is for clients who are also using rental income to qualify. These individuals will also need to bring a copy of their T1 General tax return.
Secondly, clients need to assemble proof of down payment and closing costs. Simply, 1.5% of the purchase price of the home is the working number that is used for closing costs. For example, clients putting 5% down will also need to prove they have an additional 1.5% (or 6.5% total) for that particular purchase. There are several acceptable forms of down payment confirmation – current bank statements for cash down payments, RRSP statements if using these through the HomeBuyer withdrawal plan, investment statements etc. Clients may also be obtaining a gift from a family member for all or part of the down payment. In this case most lenders will have a standardized gift letter for this purpose.
Although a lender will obtain a credit report during the application process, if clients have any known issues pertaining to the report such as errors in credit reporting or recently paid off accounts, they should look to bring any supporting documentation along to the meeting as well.
Finally – a list of questions! For many clients, the process can seem a bit daunting, and as there is often a lot of information presented, preparing a list of questions ahead of time will ensure that all concerns are addressed and the process can move forward smoothly.
Being well prepared for the initial interview with documentation in hand gives the lender accurate information which in turn allows for a more precise answer to what the client will qualify for, and the house search can begin !!
Submitted by: Bert Czombos - TD Canada Trust Manager, Residential Mortgages Windsor, Essex County - Tel (519) 948-3553 - fax (519) 948-7950 bert.czombos@td.com
