The lender evaluates the borrower’s ability to service the debt.

Verification of income for mortgage financing

A look at the list of the documentation that may be required by your lender

When an individual applies for a mortgage, the lender evaluates the borrower’s ability to service the debt, or in other words, that the borrower has a high enough income to make their payments. Provincial regulations regarding mortgage lending practices require that lenders are diligent in requesting documentation that provides verification of the borrower’s income through reliable, well-documented sources. The documentation that is required will be dependent upon the type of employment or source of income. If you are employed, self-employed or have rental income, the following provides a list of the documentation that may be required by your lender.

Salaried or Wage Earners will need to provide a recent pay stub and current employment letter to confirm their current salary or hourly rate. The employment letter must be on letterhead (including full address and contact information), signed and dated, and include employees name, position and salary. If there is income from overtime, bonuses, profit sharing, or the employment is seasonal or fluctuating, lenders will require a minimum of two years of the most recent Notice of Assessments (NOA) and/or the past two years tax returns to determine that income is consistent from year to year. A NOA is an annual statement sent by Canada Revenue Agency (CRA) to the taxpayer after they have received your federal income tax return.

Lenders may require a copy of your most recent NOA to confirm that any tax owing has been paid. If you have an on-line account with CRA, these documents can be printed electronically.

Self-Employed: if you are a sole proprietor an average of two full years of income can be confirmed by NOA’s and/or T1 Generals that includes the Statement of Business Activities. If the most recent NOA’s show that there is income tax owing the lender will require documentation showing that the taxes have been paid in full. If you are a partnership, incorporated or limited company, income can be verified by financial statements that were prepared by a professional, accredited accountant. T1 Generals and NOA’s will verify the income on the financial statements.

Rental income: Lenders may have different methods of calculating how much rental income they will allow for qualifying. Rental income is typically verified by a signed lease agreement and/ or an appraisal report that indicates fair market rents. A lender may also request T1 Generals and/or Bank statements as an additional form of confirmation in addition to the lease agreements.

Keep in mind that every situation is unique and you may be required to provide additional documentation. Providing the requested information as soon as possible will speed up the application process and move you quicker to home ownership. If you are looking for assistance with your mortgage financing, please contact us.

Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde 250.470.8324; Darwyn Sloat 250.718.4117; Christine Hawkins 250.826.2001

Just Posted

Need to catch up on news? You’re covered

Every Saturday the Capital News will highlight stories from the week

Big White board school among best

Director of snow sports, Josh Foster, is one of the top instructors in Canada

Seniors prefer funeral to lifestyle planning

Survey finds 73% of seniors have a will, only 13% have long-term care plan

Okanagan College business students soar

Medal winners at Western Canadian Business Competition

UBCO civil engineer touts cohousing option

Gord Lovegrove says cohousing is sustainable social and economic lifestyle

VIDEO: B.C. Mounties reunite veteran with lost military medals

RCMP say Zora Singh Tatla, who served in the army in India for 28 years, is the righful owner

Federal government seeks public feedback on pedestrian safety

What safety measures do you think need to improved for pedestrians and cyclists?

4 facts to ring in St. Patrick’s Day

What do you really know about the Irish celebration?

Experts urging caution as rabbits die by the hundreds in B.C. city

Province of B.C. confirms more positive tests for rabbit haemorrhagic disease

Canucks snap scoreless streak but fall short in 5-3 loss to Sharks

Swiss forward Timo Meier nets two, including the game-winner, to lead San Jose

Search continues for 10-year-old Montreal boy missing since Monday

Montreal police said they are exploring every possibility in search for Ariel Jeffrey Kouakou

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Airline passenger-rights bill claws back protections for travellers: Advocate

Bill C-49 would double tarmac delays, scrap compensation for flights affected by mechanical failures

Canadian research vessel to explore 19th Century shipwrecks

Commissioned this week in Victoria, the RV David Thompson is Parks Canada’s newest vessel

Most Read