Getting ready to buy your own home is a rewarding process. Soon, you will have the comfort that investment in your own piece of real estate will provide.
However, a less comforting part of the process is applying for mortgage loans. The application process is full of stress about how you will afford your mortgage, if you will get approved, and if you are going with the right lender. You can get preapproved, so you know up-front what you are eligible for, but preapproval requires a lot of paperwork.
Putting your paperwork together requires some time, but it will make the rest of the process much easier. Here are the documents you will need.
1. Proof of Identification
The first step is providing proof of identification to your mortgage broker or lender. The entity lending you money wants to know that you are exactly who you say you are and not someone attempting to commit fraud.
Any government-issued ID will help with proof of identification. However, it needs to have your current address on it, so make sure all of your address information is up to date. You will also need to provide your SIN number.
2. Proof of Employment and Income
The next important step in the mortgage process is proving to the lender that you are employed. Mortgage loans are investments by lenders in you, so they want reassurance that you will be able to pay that money back. The most reliable proof is proof of employment.
You have to prove that you are employed at a reliably paying job, preferably one where you have been for a year or two and that your income is enough to afford the mortgage. Documents that fit in this category are pay stubs, tax forms such as a T1 or T4, or even a letter of employment. If you have none of these documents because you are self-employed, you will need to submit detailed proof of income going back several years.
3. Information About Other Debts
When mortgage lenders agree to give you a loan, they want to know that you don’t have too many other debts that will get in the way of your ability to pay your mortgage. If you have regular car loans or student loan payments but can still afford a mortgage, that won’t affect your chances, but you will need to share information about them.
Mortgage lenders will also look at your credit score.
4. Proof That You Can Afford the Down Payment
Besides paying your mortgage, there are other expenses involved in buying a house, such as the down payment and closing costs. You may be able to afford a monthly mortgage payment, but banks want to know if you have the savings to afford a down payment as well.
You can prove that you have the money for a down payment by showing statements from savings accounts or investment accounts or proof that you have sold your existing house and will use that money for a down payment. If this is your first time buying a house in Canada, you can apply for the RRSP Home Buyer’s Plan and use that as proof of down payment.
5. Information About the Property
Finally, your mortgage lender wants to know the details of the property you will be buying to know the value. Documents include the real estate listing and accepted purchase and sale agreement.
Putting together the relevant documents for applying for a mortgage in Canada is difficult, but keep these categories in mind and start gathering paperwork today.