We’ve all heard the Scout motto “Be prepared”. It’s great advice if you need a mortgage. Assembling everything your lender needs to verify your income is a critical component of mortgage success. A last-minute scramble for documents just adds to stress. Get a Mortgage Kit folder ready and begin collecting the verification you will need for your income type:

1. FULL-TIME SALARY: Provide a recent pay stub and a “letter of employment” on company letterhead that confirms a) your position, b) your annual salary, and c) the length of time you’ve been in your position. If you’re a fairly new employee, lenders will want to know that your probationary period is over. And they will follow up. Commissions and bonuses can be supported by your last two notices of tax assessments.
2. COMMISSION, CONTRACT, PART-TIME AND SEASONAL EMPLOYMENT: Company letter and paystub are required. Income must be consistent and can be proven with a two-year average of tax assessments or T4s. If the position is contract, a copy of the contract and any renewals is required.
3. SELF-EMPLOYED: Assemble a) two years of tax assessments, b) business license or registration, or articles of incorporation, c) your T1 general tax returns for the last two years, OR the last two years of accountant-prepared financial statements (if incorporated). Lenders recognize that self-employed income is kept low, so some expenses on your statement of business activities can be added back. If income is difficult to prove, be sure to have a strong credit history and downpayment. Otherwise you may require an alternative or private mortgage lender in Toronto
4. CHILD SUPPORT: A copy of the separation/divorce agreement and three to six months bank statements are typically required. This income should be less than 30% of total income.
5. DISABILITY: A letter confirming permanent status along with a paystub.
6. MATERNITY LEAVE: Some lenders use full employment income if the employment letter confirms a return date within one year.
7. PENSION, RRIF, INVESTMENT INCOME: Most recent tax assessment, T4As for pension income. There must be sufficient funds in the investment for the income withdrawal.

Purpose of Funds  

• Purchase, Refinance (1-4 units non-owner occupied).
• Equity Take-out: Maximum $200,000.
• Not available on Purchase / Refinance Plus Improvements, New to Canada or Stated Income Programs.

 

Maximum LTV  

• Maximum 80% Mortgage.

 

Property Value

• Minimum mortgage amount $60,000.
• Maximum property value $750,000 (Up to $1,000,000 in Greater Toronto / Vancouver Area).
• Minimum property value $75,000.

 

Terms    

• 5 Year Fixed Term.

Amortization  

• Minimum 10 years.
• Maximum 30 years.

 

Property Types    

• Resale or new construction (single advance).
• Restricted to residential units.
• Readily marketable residential dwellings, located in markets with demonstrated ongoing re-sale demand.
• Ineligible property types: time-share interests, vacation homes, commercial zoning, rooming/ housing quarter share, shared ownership rental pools.

 

Lending Criteria    

• Must meet lending guidelines.
• Borrower and subject property must be located in the same province.
• Maximum 4 properties in the borrower’s portfolio.

 

Debt Servicing    

• Maximum TDS 40%.

 

Credit Bureau  

• Recommended credit score – Minimum 680.
• Borrowers must reflect strong credit worthiness, no prior bankruptcy.
• Primary borrower is required to have a min. of 2 years established credit with a min. of 2+ trades.

 

Borrower Qualifications    

• Down payment from borrower’s own resources. Gifted down payment not permitted.
• Borrower must currently own existing principle residence.
• Documented verification of net worth $100,000.

 

Rental Income Confirmation  

• Rental Income must be confirmed with at least one of the following documents :
• T1 Generals, Lease agreements, Bank Statements showing a 12-month history confirming rental income has been received. (If not available, Fair Market Rents may be considered on exception upon disclosure.)
• 50% of the gross annual rental income may be added to borrower’s gross annual income.

 

Appraisals    

• Full appraisal required WITH fair market rents when LTV <75%.
• Property must meet lender standards.

 

Insurance Premiums  

• No insurance premium at LTV <75%.
• Insurance premium paid by borrower only at 75.01-80% LTV, no appraisal required.

Amortization    LTV Ratio    Single Premium    Top-Up Premium
25 years          75.01%-80%       2.50%                     3.75%

*Eligible for a 30 year amortization (subject to a 0.20% premium surcharge).