The mortgage arrangement process can seem simple and effortless, or it can become exhausting with one document requirement after another. If you have a better understanding of what a mortgage lender is looking for, and why they require certain documents, then the majority of those applying for a mortgage will find the process a breeze. 

Our goal is to ensure you have the best experience possible, and the better job we do at helping you understand the process, the easier it is for us to reach our goal of giving you a better experience with your mortgage than you’ll get anywhere else. 

Below I discuss the standard documentation required for mortgage approval, along with the reasoning behind what they are needed. 

 

Typical Mortgage Document Requirements

As part of the mortgage application process, you’ll be given a list of required documents. Regardless of the lender, the requirements are similar, so it doesn’t matter if you’re dealing with a major bank, credit union, or monoline lender. 

Document requirements can vary depending on the type of transaction. For example, a refinance or transfer application would not require a purchase agreement or down payment confirmation. 

Regardless of the type of transaction, there are two documentation requirements that are always required: 

  • ID 
  • Income confirmation 

 

ID 

Two pieces of ID will be requested, one primary and one secondary. The primary ID will need to have your photo, but this is not required for the secondary. 

Here are some examples: 

PRIMARY

  • Driver’s license 
  • Passport
  • Canadian citizenship card
  • Canadian permanent residence card 
  • Government-issued photo ID card 

 

Note that while a Health Card is government-issued and contains your photo, it is not an acceptable form of ID. This is because institutions are prohibited from collecting or retaining Health Cards for purposes of identification unless they are involved in provincially funded health care. 

 

SECONDARY

  • SIN card 
  • Canadian birth certificate 
  • Credit card 

 

Copies of both the front and back of all IDs will be required except for passports. 

 

Income Confirmation

Confirmation of income is one of the most important components of mortgage approval. The requirements will vary depending on whether you’re working for a company/institution or self-employed. 

I’ll start by detailing the requirements for employed borrowers. If you’re self-employed then you can skip to the next section. 

 

Document Requirements for employed applicants: 

  • Letter of employment (LOE)
  • Paystubs
  • T4s

 

Letter of employment 

The LOE must be dated within 30 days and must show your position, start date, and annual income. If you are paid hourly then the letter should also state if you are guaranteed a specific minimum number of hours per week, along with your hourly wage. If you are paid hourly, and your employer does not guarantee you a specific minimum, then you will need to have a two-year history of working for the same company before most mortgage lenders would consider your income. 

The reason being is that with no specific minimum, there is no way to determine your useable income without using a two-year average. It doesn’t matter if you’ve consistently been working 40 hours for the last six months or not. Mortgage lenders will want to see a two-year history, which they would then average out to determine a usable income for you.  

Note that every situation can be a bit different, so if you’ve been at your job for less than two years, and you’re not guaranteed a specific number of hours, then bring this to our attention and we can advise you accordingly. 

Why this is required: 

It’s an informal breakdown of your current employment. It also gives the lender a contact name that they can reach out to so they can verbally verify your employment. It’s recommended that you reach out to your HR or supervisor to let them know that they can expect a call from the lender. 

Why do they need to verbally verify your income? 

Simple. Because mortgage fraud is unfortunately a big problem in this industry. As you’re being lent hundreds of thousands of dollars, the lender needs to do their due diligence to ensure the authenticity of the documents. 

 

Probationary employment 

If your employment is new and you’re on probation with your current employer, then your letter of employment will need to state that you’re on probation, and when the probation expires.  Most lenders will be okay with probationary employment, providing that you have a solid history in a similar line of work. 

 

Maternity/paternity leave

Most mortgage lenders will consider using 100% of your income, provided you are returning to your job within 12 months.  The letter of employment would need to state that you’re on maternity leave, along with your expected return to work date. 

 

Contract
If you are on a work contract, then your letter of employment should state this, along with the contract’s expiry date. The letter should also state whether the contract is renewable. 

 

Part-time employment

For a lender to consider part-time employment, then the same rules apply. However, less common for part-time jobs to have guaranteed minimum hours. If this is the case, then most mortgage lenders will require a two-year history at the same job for the income to be considered. 

 

Pay stubs 

At least one recent paystub will be required, however, some lenders may ask for two. Your paystub should be dated within the last 30 days. A recent paystub is not required if on maternity/paternity leave, however, a lender may request the last paystub you received prior to going on leave. 

Why this is required:

Paystubs provide validation of the income stated on your application and letter of employment.  They also provide confirmation that your earnings are consistent and on track for the year. In some cases, your year-to-date (YTD) gross income on the paystub can be used to boost your maximum approved amount if needed.  

 

T4s

If your income has a non-guaranteed component such as bonus, overtime, or commission, then T4s are required for the last two years to use the varying component. They will then average out the last two years, which then allows us to use the non-guaranteed income. You’ll need to have been at the same job for two years, and your income must have increased year over year. If income dropped, then a lender may only consider the lower of the two. If you’ve been at your job for two years (or close to two years), and you don’t yet have the second T4 from the same employer, then no problem!  Most lenders will allow us to average out the last T4 received with the YTD gross income on your most recent paystub. 

Why this is required: 

T4s can provide the lender with confirmation of earnings from previous employment to prove the consistency of earnings in recent years. They can also be averaged out to boost your income, or to determine a useable income in situations where your base income is not guaranteed. 

 

Document Requirements for Self-Employed Applicants: 

  • T1 General 
  • Notice of assessment 
  • Articles of incorporation or valid business license 
  • Financial statements (if incorporated) 

 

T1 General

Your T1 General (tax return) for the last two years. Note that your full and complete document is required. Summaries or condensed versions are generally not accepted as they don’t always contain all the information a lender might be looking for. T1 Generals can be obtained direction from your accountant, or from the tax office you used to file. 

Why this is required:  

While the notice of assessments will report your total income for the year, they don’t show the breakdown. They could include EI, CERB, capital gains, or other forms of income that are not considered for mortgage approval. The T1 General is the only document that provides the lender with a detailed breakdown of how your income was obtained. T1 Generals are also required to confirm rental income received from any rental properties that are currently owned, if applicable. 

 

Notice of Assessment (NOA) 

NOAs for the last two years will also be required. These are mailed to you by the CRA roughly six weeks after you file your taxes.  They can also be accessed from your MyCRA account online, however, they will not show your name. From a lender’s perspective, they could be from anyone. For this reason, lenders will require the NOAs that were mailed out to you. 

Why this is required: 

NOAs provide additional support to the T1 Generals and also confirm if there are income taxes owing.  If they are then mortgage lenders will generally require confirmation that the taxes have been paid. This can be in the form of an updated notice from the CRA, or a bank statement confirming the outstanding tax balance paid to them. 

 

Articles of Incorporation / Business License 

If you’re incorporated, you’ll be asked for your articles of incorporation. If a sole proprietor or partnership, then a valid business licence would be requested. 

Why this is required: 

These documents confirm your ownership of the business, as well as how long it has been established. However, it’s understood that these documents aren’t always available, as not all legitimate businesses have to be registered. You can legally operate a business under your own name for example. In these cases, the following documents will be required in addition to your T1s and NOAs: 

 

  • Notice of Return Adjustment/Summary from the CRA (GST return)
  • Statement of business or professional activities (addendum to your T1) 
  • Financial statements for the past two years prepared and signed by an accountant.

 

Financial Statements

If incorporated, lenders will also require your corporate financial statements for the last two years, prepared by your accountant. These include your balance sheet, income statement and statement of retained earnings. 

Why this is required: 

Financial statements are required to provide the lender with additional reassurance about the overall financial strength of the company, which provide additional support around the sustainability of your income in the future. 

 

Documents Required for Purchase of Home or Condo

Purchasing a new home or condo is always an exciting time!  Here’s the list of everything you’ll need once your offer has been accepted: 

 

  • Agreement of Purchase and Sale (APS)
  • MLS listing 
  • Down payment 

 

Agreement of Purchase and Sale (APS)

This is what your realtor draws up when you are putting in your offer to purchase your new home or condo. Once your offer has been accepted, it will be fully signed by all parties, which is the version that is required by mortgage lenders. Any amendments or waivers will also be required (if applicable).  Sometimes an APS will refer to a specific schedule. For example, ‘schedule B’. Any referenced schedules will also be required by the lender. 

On a new build property, the APS can be as much as 50 pages or more. While it can be quite long, the entire document will be required, including floor plans, and Tarion warranty information.  

Why this is required

It provides the lender with the terms and conditions surrounding the purchase. This includes terms of the agreement including purchase price, deposit amount, closing date and conditions. 

 

MLS Listing 

The MLS listing is what your realtor sends you prior to your purchase. It contains various information about the property, including the asking price, property taxes, lot size, etc, along with a description of the property. The MLS listing may or may not include the square footage (living space above ground) and age of the property, however, this information will be required prior to submitting your file through to a mortgage lender. If the listing is missing this information, then you’ll be asked to obtain this information from your realtor. You can eliminate some back and forth by sending this information to us along with the listing. 

It’s important that you send the listing you received from your realtor, and not the listing from a consumer-based site such as realtor.ca. The listings found on these sites will generally not have all the information required by lenders. 

Once your offer has been accepted, the original link sent by your realtor will no longer be valid, however, they can provide you with an updated link, or PDF of the listing. 

If you are purchasing a new build property, or a private sale, then there would not be an MLS listing available, therefore it would not be required. 

Why this is required:

The MLS listing confirms the details of the property you are purchasing as explained above. 

On private sales where there is no MLS listing, appraisals are always required to confirm the missing information. On new build purchases, the property information is generally confirmed in the purchase agreement. 

 

Down payment 

Confirmation of down payment is taken very seriously by all mortgage lenders as anti-money laundering legislation requires them to keep tight records. You’ll be required to provide bank statements showing a 90-day history of activity for any portion of the down payment that is coming from savings or investments. Any funds being transferred into these accounts must be accompanied by 90 90-day history of bank or investment statements from the source account.  For example, if you transferred $10,000 from your TFSA into your savings account, then a 90-day history would be required for both accounts. 

Bank statements must show your name and account number.  With some online banking systems, your statements may show the account number only. From a lender’s perspective, this could be anyone’s account, so they would need to confirm that the account belongs to you.  You can simply provide an account statement page which will show your name and account number together. This allows the lender to cross reference the account number with your name to prove that the account belongs to you. Screen shots from smart phones will generally contain no ownership information at all, therefore will not be considered… even with supporting documents. 

If your down payment is coming from the sale of the current property, then you’ll need to provide the agreement of purchase and sale for the sold property, as well as any amendments, waivers or schedules (if applicable). If the sale of your home closes prior to your new purchase, then you’ll need to provide the trust ledger received from your lawyer at closing showing funds received, along with confirmation of the proceeds deposited into your bank account. 

Gifted down payments are accepted from immediate family, such as parents, grandparents, or siblings. The donor will need to complete a simple form stating that it’s a gift and doesn’t need to be repaid. If the gift is coming from overseas, then you’ll also need to provide a copy of the wire transfer, and most often, a 90-day history of the donor’s account, along with your account statement showing the funds being deposited.  

Why this is required: 

Confirmation of down payment is a huge part of mortgage approval, and ALL mortgage lenders are very particular about it. They need to keep detailed records so they can be in compliance with anti-money laundering legislation. I would recommend reading my blog on Everything You Need To Know About Proving Your Down Payment.  I consider this to be mandatory reading for anyone purchasing a new property. 

 

Documents Required for Refinancing or Switching Lenders

Refinancing or switching mortgage lenders will have simpler document requirements than purchasing, mainly because there is no down payment that needs to be verified. In addition to income confirmation, the general requirements are as follows: 

  • Current mortgage statement 
  • Property tax bill
  • Home fire insurance policy 

 

Current Mortgage Statement 

The mortgage statement is provided to you by your current lender. It outlines all the details of your mortgage including payment, payment frequency, maturity date, rate etc. Lenders will generally mail you out a paper copy of your year-end mortgage statement each January. This can often be acquired through your online mortgage portal as well, which is offered by most lenders. It’s important that the statement shows the names of the registered owners, as well as the address of the property.  Some online portals may not show the property address. 

The mortgage statement will also be required for any additional properties owned that are not being sold. 

Why this is required: 

Without a mortgage statement, the lender would have no way of knowing the details surrounding the mortgage you are transferring, including the property address.  The mortgage statement gives the lender all the information they need. 

 

Property Tax Bill

This is sent to you three to four times per year (depending on the city) by the municipal tax office. This is required for the new lender to confirm how much you’re currently paying in property taxes.  There are both interim tax bills, as well as a final tax bill. It’s generally the final tax bill is required, as it’s the final taxes that the lender needs to verify.  If you don’t have a copy of your final tax bill, then you may need to contact your municipal property tax office to have them send you one. 

The property tax bill will also be required on any other properties you own that are not being sold. 

Why this is required:

The property tax bill is how the lender confirms your annual property taxes, which is required for calculating your debt-to-income ratios. It does not matter how low your ratios are. Without the property tax bill, tax bill, they have no confirmation. Lenders need to have accurate and precise debt-to-income ratios for compliance purposes. They cannot simply ‘assume’, regardless of how low your debt-to-income ratios might be.  

 

Home Fire Insurance Policy
This is required to assure mortgage lenders that their security (your home) is protected in the event of a fire.  The policy needs to be in effect at time of closing the new mortgage. It’s not uncommon for an insurance policy to end on your maturity date.  Your insurance provider will generally send out the new policy approximately 30 days before it expires. If you’re starting the mortgage application process prior to receiving the new policy, you can simply send it into us once the new policy has been received. 

If you live in a condo, then fire insurance is typically provided by the condo board. In this case, you will need to obtain a copy of the policy from your condo board. 

 

Why Do Mortgage Lenders Require So Many Documents?

When a lender approves you for a mortgage, they are agreeing to lend you several hundred thousand dollars or more. If it were you lending out the money, I’m sure you would be doing the same. Mortgage fraud is a major problem in our industry, so lenders need to do their due diligence before they attach their signature to the large cheque they’ll be writing you on closing date. If they were audited and their file was incomplete, then they can face severe consequences. It’s only natural that they want to be thorough.  

 

Challenging Document Requests

If we can get something waived we will, often without you even knowing. We’ve been through this process more than 2,000 times, so we know exactly what should be required and what should not. Sometimes a lender will require something that might seem ridiculous… and sometimes it is ridiculous. But in the end, they have the right to request any document they need to feel comfortable with lending on the mortgage. Sometimes the requirement is from their investors, which may not be something they have any control over. 

 

Conclusion

The mortgage process is not always fun, but we’ll of course do what we can to make it as easy as possible. Some applications are straight forward, while others can be more challenging, requiring additional documentation. A lender has the right to request additional documentation at any time during the process. Anything they need to feel comfortable entrusting you with their money.  We’ll do our part to ensure we manage your expectations and to complete the process with as little stress to you as possible.  And most importantly, to ensure your mortgage closes on time.