What kind of paperwork is your lender going to require when you are applying for a mortgage and why? In this “Friday Feature” series, we will take a close look at that documentation over the course of three articles – Employment Verification, Downpayment Verification and Property Verification.
Let’s get right to it and examine the paperwork required for “Employment Verification”. The purpose of supporting documentation is just that, really, to support or prove the information presented to the lender in the mortgage application. When we advise the lender that you are say, a salaried employee, we need to provide the lender of verification of this from your employer by way of a letter of employment and a recent paystub. Let’s take a closer look at both…
1) A Letter of Employment
- This should be issued by your Human Resources Department or your direct superior and should be written on official company letterhead. – It’s required that the letter note your job title, start date and yearly salary, if that is how you are paid. – If you are paid by the hour, the letter needs to state your hourly wage and the amount of hours that you are guaranteed each week, if any. – If you are paid a bonus or if you are on any kind of commission structure, this should also be explained in the letter and it should be noted whether this income is guaranteed or not. – The letter should be signed and provide contact information for verbal verification of the contents of the letter by the lender.
2) A Recent Paystub
- Should be no more than 30 days old. – Should clearly show your name and the name of the company you work for. – Cannot be handwritten. – Should show applicable deductions to Revenue Canada. – Should show your Year to Date earnings.
If you are paid by the hour, if you are part time or if any part of your income comes from bonuses or commission, the lender will usually require you to submit two years of Notices of Assessments from Revenue Canada to show what your average income is from these sources. That’s because most of the time these sources of income are a bit erratic and may vary from week to week or year to year. A two year history of this type of income usually gives the lender a good idea of what income you can regularly count on.
Notices of Assessment are the blue or sometimes gray documents that Revenue Canada sends you after you have filed your taxes – they show the infamous “line 150” that states your verified income for the year and they inform you whether you owe any additional income tax or if you are entitled to a refund.
NOTE – If you are applying for a mortgage and you think you will require your Notices of Assessment but you don’t have your copies for one reason or another, you can call Revenue Canada to request new ones. However, they will not fax, email, courier or rush them in any way to you – they will only send them by snail mail so be sure to give yourself about 7 to 10 days to receive them.
Occasionally, a lender will request T4’s to confirm where you work but to confirm your income, they generally prefer the Notices of Assessment because let’s face it, anyone can make up a T4. A Notice of Assessment shows that the Government has verified your income and this make lenders quite a bit more comfortable.
The documents required for Self employed income can a quite bit more complicated, depending on the type of mortgage you are obtaining. We’ll take a detailed look at those documents in another article but in the meantime, please be sure to contact one of our Licensed Mortgage Brokers if you are self employed and have any questions about income verification or if you need clarification on any of the documents discussed in this article.
Be sure to check back next week when we take a closer look at Downpayment Verification.