When it comes to buying a home or refinancing your existing property it is important to know what information you need to provide to the lender including the documents for mortgage approval.
Delays on approval for mortgage applications in most cases occur for the same reason, lack of documents for mortgage approval. Most people can show statements for RRSP or savings for the down payment or complete the gift letter if they are receiving the down payment from a family member. Sometimes the issue is with showing proof of income. For those who are paid salary with guaranteed income each pay period the documents for mortgage approval are simple, 2 recent pay stubs and a job letter.
For those who are paid hourly or with fluctuating hours each pay period or on commission, the lenders need to see more. We will ask for 2 years of income with your T1 General tax returns and/or Notice of Assessments (NOA). The NOA is the piece of paper you get back from Canada Revenue Agency after you filed your tax return. The NOA confirms your income as filed, if taxes are owed and your RRSP contribution level. You would receive this by mail within a few weeks after filing your tax return. In many cases after tax season, we as tax payers will file away the T1 General tax return with the T4 and when the NOA comes in the mail it goes in a drawer somewhere. Many people don’t keep all their tax information in a file so when they need the documents for mortgage approval it can be a challenge to locate them. Or you need to contact the accountant or CRA to obtain the most current tax filing or NOA. I highly recommend you keep a file for your T4 (you receive from your employer), your T1 General tax return provided by your accountant and the NOA you receive from CRA after filing. Keep them for at least 2-3 consecutive years.
For those who are self-employed the same advice applies. In addition you will need proof of business which will include either a business license, GST return, articles of incorporation or company financials. If you are self-employed but pay yourself a salary and receive a T4 each year from your company we will require those documents for mortgage approval.
If you own rental properties you will also need to show your statement of real estate activities which is included in your T1 General tax return package and you may be required to show rental agreements and mortgage statements for each property.
When in doubt of what documents you need for your income from employment, business for self-employment or rental income, consult with your mortgage broker.