You made an offer on a home – the important next steps
The time is here! You have worked with your realtor or a home builder and now have an accepted offer on a home! First of all, congratulations. We are so excited for you and always here to help. At any point if you feel overwhelmed or any worry please just reach out. We are experts and have years of experience in the mortgage industry and we have a quick phone call, zoom, or email than have you feel concerned.
So what are the documents required for the mortgage approval process?
Well here goes – documents relating to home are important, an accepted offer to purchase and a current MLS listing are required. In some cases, we handle private sales, this simply means that the property is not MLS listed and you are working directly with the home owner. If you are working with a realtor, they can forward on the offer to purchase (signed by all parties), the MLS listing (provides all the details including square footage and lot size), and if the home is a condo or townhouse then condo documents may be required. This depends on the lender. In cases where the lender does not obtain the condo documents it still important to obtain a condo document review with by a condo doc reviewer or a real estate lawyer. Your realtor will walk you through this process.
Income Documents – what is needed and why
All lenders need to verify the income we detail in a mortgage application with documents.
If you are hourly or salary, a letter of employment from your HR department, on company letterhead, that states – the position start date, the role, the salary annually or the hourly amount, how many hours per week are guaranteed, and if you are new to the position – the time remaining in the probation. A recent pay stubs is also needed. Pay stubs detail the income earned, the income tax deductions, the name of the company, your name and address.
If you annual income fluctuates – bonuses, overtime, or commission income is earned on top of the salary or hourly income – then lenders may also require for the most recent two years of T4s from the company. T4s verify the two year history of total income and in some cases the two year average of the income. In industries like oil and gas, trades, or nursing – overtime, commission or bonus income is important and very helpful to a mortgage application.
If you self-employed, all lenders will require the most recent two years of T1 Generals (the document your accountant submits to the Canada Revenue Agency) and the Notice of Assessments (the document CRA sends you to verify your total annual income and any income taxes owing or being refunded to you). Accountants keep record of T1 Generals and can provide copies directly to us if you prefer. If you aren’t able to find your Notice of Assessment we are able to obtain this documents with one form signed by you! Let us know. We are here to help.
For self-employed applicant’s lender do need to know if you are a sole proprietor or are incorporated and the history of either. We can also obtain your original incorporation details through an online system. So if you need assistance with this just let us know!
Lenders verify the source of all down payment funds. This is a federal government rule and it’s very important. Let’s say you are purchasing a $400,000 home and the down payment amount is $20,000. We must provide the lender with details and written verification of the $20,000 and the source of funds. This may involve bank statements, RRSP or investment statements, or TFSA statements. Lender collect a 90 day or three month history of the funds. Each account statement must have your full name, the date, and the three month history of the account transactions.
Often, family members gift down payment funds. In this case the family member gifting the funds signs a one page form called a gift letter. This letter details the amount being gifted, the address of the new home, the giftor and the gifted (that’s you). We will provide the gift letter form – each lender has a slightly different version.
Sale of a property or a vehicle – in this case we must obtain the sale contract for the sale of home or a bill of sale for a vehicle or motorcycle. Lenders simply want to verify that you in fact owned the home or vehicle and it is sold and the funds are in your account.
Offer to purchase and MLS listing
As we move through the mortgage process, if there are changes to the original offer to purchase such as the closing date, change in purchase price, or amendments please let us know!
We provide an explanation of all of these documents at the time of pre-approval. And again once there is an offer to purchase you can expect an updated list and our support in understanding what is required and why. Throughout the mortgage application process we will provide updates and will touch base for any outstanding items.