The bank representative hands you a thick stack of documents. You are told that these documents must be signed (or initialed) to complete the loan process. However, rarely does anyone tell you what is on those pages. It can be daunting for first-time home buyers – especially if they do not know what to expect.
Inexperienced home buyers should always check with their agent or mortgage representative to determine what documents are required for registration. After reviewing the list of documents, you may discover that there are many you have never even seen before. To help prepare others for this experience, below is a list of typical documents you need to get a mortgage in Canada.
Mortgage Documents Checklist
1) Pre-Authorized Debit form
The form authorizes your financial institution to electronically debit your bank account each month to pay off the balance on loan.
2) Statement Indicating Down Payment Source(s)
This proves that all funds used towards the down payment came from legitimate sources. Funds must be traceable – i.e., brokerage statement, RRSP withdrawal confirmation, and second mortgage payoff letter.
3) Income Verification
Your lender will require your most recent income tax return and the T4 slips from all companies you have worked for to date to verify your income history. You should also provide a record of any assets or other sources of funds that can be used towards repayment of the mortgage, such as property rental income, dividends from investments, trust income, etc.
4) Pre-Approved Letter From Lending Institution(s)
That is to show that you have been pre-approved for a loan based on a detailed analysis of your financial position by a qualified mortgage specialist.
5) Job Offer Letter
If you are self-employed, this letter provides proof of stable employment and outlines projected business activity over at least the next twelve months.
6) Buyers Profile
Lenders will typically request a summary of your financial situation to complete this form.
7) Verification of Deposit Held/Assets Owned by the Client(s)
Your lender will want proof that the loan can be repaid and have enough money left over for all other living expenses and savings goals. That may include: pay stubs, monthly bank statements, letters from employers/financial institutions showing salary amounts and deposits into accounts each month over the past six months, RRSP or TFSA contribution confirmations for last year, net worth statement (see note below), etc.
Note: A Net Worth Statement is a list detailing everything you own (i.e., personal property such as your home, cars, heirlooms, etc.), minus what you owe (i.e., money owed on credit cards or loans). Assets are listed according to liquidity – the most liquid items first. The value of each asset is listed next to it. Liabilities are listed last and show how much money or equity is left over after deducting debts from assets. Not every lender will require this form, but it does help provide a complete picture of your overall financial position.
8) Letters Regarding Any Other Real Estate Owned/Mortgages Currently Held
Your lender will want to know if you have other mortgages on any other properties. They’ll need to know this to determine if you can afford the new mortgage payments and still meet all your other financial obligations.
9) Certified Cheque
To complete the registration process, your lender will need a certified bank cheque as proof that you have enough money to pay for all fees and closing costs. The lender must ensure that the name(s) on the cheque must match those on the title as part of this process.
10) T4 or Notice of Assessment
This confirms federal and provincial tax amounts and dates so that interest rates quoted by lenders accurately reflect income tax deductions.
11) Pre-Approved Guarantor Form (if applicable)
If you are buying with someone else who is not going to be on title or provide a down payment, they may need to complete this form for their income and assets to be considered for purposes of underwriting the mortgage.
12) Endorsement/Holder information – The endorsement section of your mortgage documents lists all authorized signers (i.e., those able to make decisions on behalf of the lien-holder). The section must match up with the individual(s) listed on the title and statement of authority (if applicable), or they may not be permitted to make any changes to your file. That includes signing, amending, and terminating agreements and mortgages, and authorizations should be limited based on your settlement date and other requirements specified by your lender.
13) Statement Regarding Holding Title in Trust (if applicable)
If you are buying a property held in trust, you will need to complete and submit this form that documents your authorized signers.
14) Statement Regarding Mortgaged Property (if applicable)
If you are buying an already mortgaged home, you will need to provide proof of the mortgage to be removed from the title and replaced with your new mortgage. You may also need an updated appraisal on the home if there have been any significant changes or improvements since the last valuation was completed.
15) Verification of Employment
Your lender will ask your employer(s) to confirm details related to your job description, salary, etc., so make sure to provide accurate information upfront. The lender may also ask for a letter verifying how long you have been employed at that company.
Closing Thoughts
Mortgage financing isn’t always simple, but it doesn’t have to be complicated. Before you home-hunting, be sure that you are financially prepared to own the property by consulting with professionals who can assess your income and credit history/score, determine how much of a mortgage you qualify for, and help explain the entire process.
And remember: any violations of your lender’s requirements could result in a declined mortgage, so be sure to carefully review all the information to ensure you have submitted everything required.
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