1) Proof of income:
Documents that provide proof of your income are very important. They will be the hardest to find and require the most work, so it is absolutely essential that you be prepared if you want to avoid a lot of stress.
Salaried employees must produce a recent pay stub and a letter confirming their hiring date, their position, salary, and employment status (permanent or temporary). This letter has to be recent, usually six months prior to your mortgage application. For those who work overtime, whose work schedules are irregular, or whose record shows employment instability, they also have to produce 2 or 3 years of federal tax assessment notices.
Self-employed workers have to furnish:
- Their two previous years of complete income tax declarations;
- Their last two federal tax assessment notices;
- Their last provincial tax assessment notice.
Moreover, depending on your situation, insurers (CMHC, Genworth) and financial institutions will ask you for your business financial statements for the past two years.
2) The down payment:
If you are buying a property, you have to prove that you have the required minimal 5% down payment when you seek mortgage approval, as well as 1.5% to cover the costs related to the transaction. You cannot make a purchase offer thinking you will find the money before you sign at the notary’s. In effect, you will have to prove to the sellers that you have the necessary down payment required for the transaction when you make your purchase offer.
Below is a list of documents that can certify your down payment:
- Bank statements from the last three months that prove you have accumulated the necessary savings (not a big deposit that may indicate some sort of loan);
- A recent statement from an investment and/or an RRSP;
- Legal proof of any inheritance or a donation you have received whether or not the amount appears on your bank statement.
If the down payment comes from the sale of a property, you will have to produce the completed purchase offer of the sale, the municipal tax account, a recent mortgage statement, and proof of unconditional acceptance of the buyers.
3) Concerning the property you are purchasing:
If the property is sold through a real estate agent, you will need:
- The complete purchase offer with all the annexes;
- The MLS property description, also known as the “Listing”.
If the property is sold directly by the owner, you will need:
- The complete purchase offer;
- The property description, if one exists;
- The most recent municipal and school tax accounts;
- A location certificate.
Mortgage approval is one of the most demanding steps in property acquisition. By preparing all these documents you will have to produce ahead of time, you’ll save yourself a lot of stress.
If you wish to know more about the documents you need to gather when purchasing a property, don’t hesitate to contact me.
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