Buying and owning a home is a memorable experience. Once you are in your home, you will be happy that you made the decision to invest. In order to be approved for a new home, you have to gather all the important documents required for mortgage application.
You will need to provide certain information to the mortgage specialist who can determine if you are eligible for a mortgage. Pre-approval is the first step to ensure you can move forward with your purchase. The pre-approval presents you with an estimate of how much you can spend. This will narrow the search of homes to ones that you can definitely buy within your approved budget.
The bank or financial institution you select will want to make sure you can make your payments on time. There are required documents that offer an accurate picture of your creditworthiness. Be prepared with the documents required to qualify for a mortgage.
Here is a checklist of documents required for mortgage qualification and applications:
An important piece of document required for mortgage application is your employment record. A letter of employment from your employer that mentions your annual remuneration and year of recruitment. It would be good to have this letter within the last 30 days.
Additionally, you should provide recent pay slips and evidence of a recent deposit. It is also good to show additional income sources if applicable. If you have a rental income, you can provide the lease agreement and monthly payments made. Keep copies of your T4 as this can be requested by the bank. If self-employed, you will need to submit your incorporation documents, T1 and financial statements for the last two to three years.
2. Credit history
Having a good credit history assures the bank that you can pay your mortgage. This is the most important factor for the bank or financial institution to make a decision. They will request authorization to verify your credit history.
You can compile your required information into one credit report that can be submitted to the bank. The bank can compare your credit report to the information with the credit history they have extracted from various bureaus. Make sure all outstanding debts and unpaid collections are cleared to be approved for your mortgage.
3. Down payment
It is good to be ready with your down payment for your home. With a down payment, you can reduce the interest you pay and remove the step of obtaining a loan or credit line for your down payment.
4. List of assets
The bank will request for your assets such as your car and other valuable items that you own. These assets will be used as collateral. Make sure to keep all bills, agreements and ownership documents ready to submit to the bank. Assets can prove you are financially sound.
5. Offer of your home
The bank would like to look at the offer of your home and will require a copy of the sales contract that you have signed. They will require the document for their records and to make sure you receive sufficient funds to pay your mortgage. They will look at all the terms on your contract. The bank may also request for the copy of the listing to include in your submission. A valuation report for the property can also be requested. Keep all these documents ready in case the bank asks for these documents.
6. Bank statement
If you are not applying for a loan with your bank, then you should have all your bank statements ready for the institution or selected bank for the mortgage. They require 3 to 6 months of your recent bank statements to review your income and day-to-day expenses. This will help the bank determine your ability to make payments. Make sure to provide your withdrawal of your RRSP under the homebuyer’s plan.
7. Tax returns
The bank or financial institution will probably ask for tax return documentation. You should make sure all your tax returns are accurate and reflects the actual income and deductions.
8. Personal documentation
The bank will require a government issued ID and other documents for your identity. ID copies should always be ready to submit. At the time of acquiring your mortgage, they will request or make copies of your IDs. They will ask for original IDs for verification. A photo ID is necessary.
9. Proof of current address
To apply for a mortgage, you will be required to show that your current residence is located somewhere in Canada. The bank or financial institution will want to see proof of your current address. You can use a bank statement or your utility bill.
10. Gift letters
You may receive money from your parents or family to buy a home. If that is the case, you have to provide the bank or financial institution with a letter to confirm that the amount is a gift and not a loan. The letter should mention the relationship of the person that has provided you with the funds.