Definition of Job Letter
A job letter is also commonly referred to as an Employment Letter
A job letter is the most basic form of income qualification for a mortgage application. When an applicant is looking to secure mortgage financing, they are responsible for providing proof of employment. For those individuals who are employed by a company in a full time or part time capacity where income taxes are being deducted through payroll, an employment letter from the employer is necessary.
An acceptable employment letter will:
- be provided by an HR department or authorized supervisor.
- written on company letter head and signed by an authorized person.
- indicate the position held by the employee along with the employment status ie full time guaranteed hours.
- indicate the hire date and if the employee is in any probationary period.
- indicate the rate of pay, hourly or salary on an annual basis
- provide any information that should be noted as it relates to job security.
- provide contact information for the lender to verify with a follow-up phone call.
Job Letter as part of Income Qualification
For those individuals that are employed in a permanent position with guaranteed hours and have passed a probationary period, typically a job letter and pay stub will satisfy income documentation for a mortgage application. However as income qualification is a major factor in a lender choosing to lend money on a mortgage, if the verbal confirmation of employment turns up any areas of concern, more documentation may be required. This documentation would be similar to those individuals who are self-employed.
For those that are self-employed, rely on commissions, or bonuses for the majority of their income will have the last 2 years of their income averaged due to the income stream’s variability. If you are paid in commission or you work a lot of overtime a job letter (on company letterhead) confirming your commission amount and length of employment, the previous two years' Notice of Assessment from the CRA, and a current pay stub may be required.
If you are self-employed - the previous two years' Notice of Assessment from the CRA, and the previous two years' T1 Generals with statement of business activities (prepared by a third party). Please note that if you are self-employed, other documentation further to that mentioned here may be requested.
If you have questions about a job letter, please contact us anytime, we would love to work through them with you!